9911796707
TMI Blog2017 (7) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act on 30.01.2013 and other corporate additions proposed were also incorporated therein. 2. The assessee is a company engaged in the business of television news broadcasting through its three different channels. It is also producing customized software, programmes for broadcasters. It filed its return of income on 30.09.2009 declaring loss of Rs. 64,83,91,422/-. Subsequently, the return was picked up for the scrutiny and notice u/s 143(2) was issued on 19.08.2010. During the course of assessment proceedings reference u/s 92CA of the Act was also made by the ld. AO to the ld Transfer Pricing Officer to determine the arm's length price of international transactions entered into by the assessee with its Associate Enterprises (in short 'AE'). The ld Transfer Pricing Officer passed order u/s 92CA(3) of the act on 30.01.2013 proposing adjustment on account of business support segment of assessee of Rs. 1,53,73,846/- against the price received of Rs. 7,46,87,177/- whose ALP was determined at Rs. 9,00,61,023/-. The ld Transfer Pricing Officer further made an adjustment on account of corporate guarantee of Rs. 10,87,56,000/- wherein, assessee has issued corporate guarant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s:- Sl No. Particulars Amount 1 Disallowance u/s 14A Rs.78,40,990/- 2 Transfer pricing adjustments u/s 92CA(3) Rs. 5,09,65,629/- 3 Unexplained money u/s 69A Rs. 642,54,22,000/- 4 Unexplained unsecured loans u/s 68 Rs. 254,75,00,000/- 8. Therefore, assessee aggrieved with the order passed by the Assessing Officer u/s 144 of the Income Tax Act has preferred appeal before us in ITA No. 1212/Del/2014. 9. The Revenue aggrieved with the direction of the ld Dispute Resolution Panel has preferred appeal before us u/s 253(2A) of the Income Tax Act challenging the deletion of disallowance of following expenditure by the ld Dispute Resolution Panel in ITA No. 2658/Del/2014:- Sl No. Particulars Amount 1 Disallowance of commission expenditure u/s 40a(ia) of the Act for non deduction of tax at source Rs. 41,54,41,111/- 2. Disallowance of transmission and uplinking charges paid to Intelsat Corporation USA on account of non deduction of tax at source Rs. 7,81,23,855/- 3. Disallowance of software expenses Rs. 82,45,612/- 10. The Revenue has raised the following grounds of appeal in ITA No. 2658/Del/2014:- " 1. That on the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Living Media India Ltd. in ITA 1264 No. 1264 of 2007 is pending before Hon'ble Supreme Court in SLP (Civil) 1257 of 2009 whereas in fact the Hon'ble Supreme Court had dismissed the said SLP vide its order dated 11/12/2009. 2.2 Without prejudice to above cross objections and in the alternate, the Ld. AO erred in not appreciating that alleged constructive payments could not be disallowed under section 4o(a)(ia) of the Act in view of the decision of the Special Bench of Tribunal in the case of Merilyn Shipping and Transport v. ACIT(136ITD23)(SB). 3, That on the facts and circumstances of the case and in law, the Ld. AO erred in agitating in Ground No. 2 of the captioned appeal that the Hon'ble DRP had erred in not approving disallowance under section 40(a)(i) of the Act amounting to Rs. 7,81,23,855 on account of nondeduction of tax on transmission and uplinking charges paid to Intelsat Corporation, USA. 3.1 That on the facts and circumstances of the case and in law, the Ld. AO failed to appreciate that the as per the relevant legal position prevalent in the year under consideration there was no obligation on assessee to deduct tax on such payments, and the amended defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to Rs. 8331150/- in the computation of income in the year under consideration." 13. The assessee further made a prayer for raising the additional cross objections for the reason that revenue in its cross objection has raised an objection that the appeal of the assessee is not maintainable on the ground that the assessment has been framed by the Assessing Officer u/s 144 of the Income Tax Act. Therefore, assessee in order to avoid any technical issues in its appeal has raised following additional grounds in its cross objection:- -1. The assessee thus without prejudice to its contention that, appeal filed by the assesee bearing ITA No. 1212/Del/2014 is maintainable, respectfully prays that, it be permitted to raise such ground as additional grounds of cross - objection. Additional/ Modified objections:- Cross objection No. 6:- That the Learned Assistant Commissioner of Income Tax (Ld. AO), Circle 13(1), New Delhi has erred both on facts and, in law in determining income of the Appellant at Rs. 8,38,33,37,197 /- as against the returned loss of Rs. 64,83,91,422 in an order of assessment dated February 21, 2014 framed u/s 144 read with section 144C (13) of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valent to $50 Million) by invoking provisions of section 68 of the Act purely on extraneous or irrelevant consideration and in failing to appreciate that there was no credits in the books of Appellant and as such section 68 of the Act had no application. 9.1 That the Ld. AO/Ld DRP grossly erred in not appreciating that the borrower of the loan namely NDTV Networks Plc, UK (NNPLC) is a separate assessee which is liable to be taxed separately for its income and no addition is warranted of the aforesaid loan transaction in the total income of the Appellant under section 68 of the Act. Cross objection No. 10:- Without prejudice to Cross objection No. 9 above, that the Ld. DRP exceeded its jurisdiction while directing the Ld. AO to enhance the variations as a result of further enquiry in respect of the loan transaction between the NDTV Networks Pic. UK and NDTV Networks BV, as such a direction is outside the purview of powers of the Ld. DRP in view of section 144C(8) of the Act. 10.1 That the Ld. DRP failed to appreciate that being an appellate authority in view of the amendment in Finance Act 2012, the Ld. DRP ought not to have issued any directions for taxing any new source of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the arm's length guarantee commission rate erroneously based on flawed methodology and adjustments (without prejudice to the Appellant's contention that it had not provided any guarantee). Cross objection No. 15:- That on the facts of the case and in law, the Ld. AO has erred in levying interest under 234B/D of the Act while completely disregarding the provisions of the Act and the judicial precedence in this regard. Cross objection No. 16:- That on the facts of the case and in law, the Ld. AO has erred in withdrawing interest under section 244A of the Act while completely disregarding the provisions of the Act. Cross objection No. 17:- That on the facts of the case and in law, the Ld. AO has grossly erred in initiating penalty proceedings under section 271(1)(c) of the Act. The above grounds of appeal are mutually exclusive and without prejudice to each other" 14. Now we first come to the appeal of the assesse in ITA No. 1212/Del/2014 and test it whether it is maintainable or not. 15. On the issue of maintainability of appeal, the ld AR commenced the arguments that appeal of the assessee is maintainable. The ld authorized representative of the assessee vehemently sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act he referred to page No. 400 of the appeal set and referred page No. 46 of 51 of the draft assessment order. His contention was that as the material information according to the ld Assessing Officer pertaining to the subsidiaries companies of the assessee was not furnished pursuant to summons issued in December 2010 and notice issued in February 2013, the ld Assessing Officer has held that accounts of the assessee are not maintained and prepared in accordance with the accounting standards issued by the Central Govt. and are therefore, incomplete and incorrect. Therefore, the Assessing Officer invoked provision of section 145(3) of the Act read with section 209, 210, 211 and 212 of the Companies Act, 1956. He further referred to page No. 47 of 51 of the draft assessment order where the ld Assessing Officer invoked the provisions of section 145(3) of the act. He further referred to page No. 48 of 51 to show that as according to the Assessing Officer there was a breach of condition prescribed u/s 145(3) of the Act and Assessing Officer was not satisfied about the correctness and completeness of the account and as according to him the accounting standard notified have not been foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. However, the Honble Tribunal has disposed off the said cross objection when it had held that the cross objection filed is not maintainable. 3. It is further submitted that the 'subject matter' of appeal in assessee's appeal (ITA No. 1212/Del/2014) is as per grounds of appeal and for the sake of brevity are not being extracted here. The assessee had also filed cross objection No. 233/Del/2014 in an appeal filed by the revenue i.e. ITA No. 2658/Del/2014. The said cross objection was filed on 08.09.2014. The assessee also filed additional grounds of cross objection (apart from the grounds of cross objection in CO No. 233/2014) in the cross objection filed by the asessee. The said 'additional grounds' in CO No. 233/2014 were filed on 03.02.2016 and also filed modified ground No. 5 of cross objection on 24.05.2016. 4. It is submitted that the perusal of the ground of appeal filed by the assessee or filed by the revenue as also the grounds of cross objection filed by the assessee does not pertain to any ground about the maintainability of the appeal and on the ground that an assessment had been made u/s 144 of the Act which is disputed by the assessee. Infact, such a ground of cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made u/s 143(3) read with section 144C of the IT Act as is specifically stated by the learned AO in the order and thus it is an admitted fact that the draft order of assessment was not made u/s 144 of the Act. In fact, there is no concept of framing the draft order of assessment u/s 144 of the Act. (b) There is no finding or direction given by the learned DRP that the final order of assessment be made u/s 144 of the Act. In respect thereof it is submitted that the learned AO without jurisdiction, post receipt of the directions of the learned DRP changed the title of the assessment order labeling it to be passed u/s 144 r.w.s. 144C of the Act though there was no such direction issued by the learned DRP. (c) Further, no direction had been given by the learned CIT in the appeal filed by the revenue, (who has directed the appeal to be filed before the Honble Tribunal against the directions of the learned DRP by the revenue) to raise such ground, and thus it is submitted, it being not a subject matter of appeal, cannot be held to be the subject matter of appeal before the Honble Bench and hence cannot be agitated or any finding can be given by the Honble Tribunal. (d) The contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntending that the draft of the order of assessment was made u/s 144 of the Act. The finding recorded are as below: "In view of the same as stated hereinabove, the undersigned holds and declares that the provisions of section 145(3) of the IT Act, 1961 is applicable to the case of the assessee for the assessment year 2009-10 in respect of previous year 2008-09 and undersigned thereby and therefore assumes jurisdiction under section 144 of the IT Act, 1961 to determine the true and correct income of the assessee company." 9. It is submitted that such a contention is completely misconceived. The mere fact the learned AO had in the draft of the order declared that he is invoking section 145(3) does not postulate that assessment was made u/s 144 of the Act. 10 It is submitted that the assessment u/s 144 of the Act could be made only in the circumstances as provided u/s 144 of the Act. The provision of section 144 of the Act are extracted here below: Best judgment assessment. 144. (1) If any person- (a) fails to make the return required under sub- section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting provided in subsection (1),[or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee], the Assessing Officer may make an assessment in the manner provided in section 144." 12. It is further submitted that when the direction of the learned DRP dated 31.12.2013, is perused it would be seen that nowhere the learned DRP states that the draft assessment order is an order to be read to be an order of assessment made u/s 144 of the Act. 13. The appellant further submits that by merely invoking the provision of section 145(3) of the Act, an order cannot be said to be made u/s 144 of the Act. All what section 145(3) of the Act provides is that, the AO may make an assessment in the manner provided u/s 144 and not that assessment is made u/s 144, since the conditions making assessment u/s 144 are entirely different. There is a distinction between the manner of making assessment and completing assessment as provided u/s 144 of the Act, they are not identical in terms. 14. It is submitted that in the instant case assessment has not been framed u/s 144 of the Income Tax Act. Nor can be stated that merely because the learned AO in the dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23(4) applies and the Income-tax Officer has to make the assessment to the best of his judgment. The Privy Council in the case mentioned above has decided that where Section 23(4) applies so long as the Income-tax Officer does not act dishonestly, vindictively or capiciously but exercises his judgment, he may make such assessment as he thinks fit even to the extent of guessing what the assessment should be. But where there has been a return and the notice has been complied with and it is found that the books which are put forward to support the return are unreliable, then one goes to Section 13. Section 13 is not an assessment but a computation section. Its provisions instruct the Income- tax authorities as to the method to be adopted in computing the profits and gains of business in question. Primarily the method is that adopted bv the assessee." 14.1 In view of the aforesaid it is most respectfully submitted that the assertion of the counsel for the revenue in the instant proceedings that the assessment was framed u/s 144 and as such no appeal lies is completely misconceived. It is reiterated that assessment has not been framed as a conditions for framing assessment u/s 144 were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cross objection which is now being raised by the revenue by invoking rule 27 of the ITAT Rules, despite the fact that such a cross objection has been dismissed may be on the ground that the delay in filing of the cross objection have not been condoned, yet there is merger of such a ground raised in the cross objection. In any case, it is submitted that rule 27 of the ITAT Rules is inapplicable in the instant case as such a Rule can be invoked by the respondent only when no appeal has been preferred by the respondent. For the sake of convenience Rule 27 is extracted hereinbelow: Respondent may support order on grounds decided against him. 27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. It would be seen that aforesaid rule come to aid of a respondent who has not preferred an appeal before the Tribunal and if any ground has been decided against the respondent by the CIT(A), then in the appeal of the appellant, he may support the order of CIT(A) on any of the grounds decided against him. However such a rule has no application where respondent has preferred an appeal. It is submitted that sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that para 2.1 and in para 3, the AOhas held that the draft order of assessment was made u/s 143(3) of the Act read with section 144C(1) of the Act and not that it was made u/s 144 of the Act. 19. Without prejudice to the above, It is an admitted position that if an AO intends to complete the assessment u/s 144 of the Act, he ought to issue the final assessment order including the income determined and tax computed and there is no need to propose an income and seek the directions of the DRP. The provisions of section 144C of the Act have no application whatsoever which is clearly spelt out by the provisions of section 246A of the Act. Thus, appeal against the order u/s 144 would lie before the CIT(A). 20. Assuming that the assessment was completed u/s 144 of the act, then in that case the AO ought to have completed the assessment i.e. determined total income and raised demand notice by 31.03.2013 itself rather than proposing to make adjustment to the returned income as emphasized in the procedure laid down u/s 144C of the Act. To support the the same, the appellant places reliance on the judgement of Hon'ble Gujarat High Court in the case of Purushottamdas T. Patel 209 ITR 52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any of the conditions is not established by the Revenue and therefore, the provisions of section 144 cannot be invoked. He further, submitted that provisions of section 145(3) or its failure does not give any right to the ld Assessing Officer to pass an order u/s 144 of the Income Tax Act, 1961. He therefore pressed upon that order actually passed by the ld Assessing Officer is order u/s 143(3) of the Act. 18. He further raised the arguments that assessment order is barred by limitation he referred that as no notice of demand was issued along with the draft assessment order it is not an order passed under the Income Tax Act, 1961 and therefore, the order is barred by limitation. 19. Against this the ld DR submitted that though the cross objection of the Revenue has been dismissed by the coordinate bench on technical grounds but still the Revenue has right to submit that the appeal of the assessee is not maintainable. He relied upon the decision of the Hon'ble Supreme Court in Post Graduate Institute of Medical Education and Research Vs. A.P. Vasan and others in (2003) 5 Supreme Court Cases 321. He referred to para No. 26 of the order to state that despite the fact that revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP. He referred to page No. 977, 978, 979, 980, 981 of the paper book to show that assessee has given a false statement before the lower authorities that assessee has been granted the permission to not to include the necessary details as required by the provisions of section 212 of the Companies Act. He submitted that in the Directors Report for FY 2008-09 which was signed by the Chairman and Managing Director of the company on 30.04.2009 it is stated that company has been granted approval u/s 212(8) of the Act to not to include the balance sheets, profit and loss account of the subsidiaries. He submitted a paper book consisting of 35 pages to demonstrate the above issue. He drew our attention to the relevant extract of sections 209 to section 212 of the Companies Act which deals with the books of account as well as the disclosure required to be made by the assessee. He further referred to the relevant extract of the annual accounts of the company which is also available at page No. 983 of paper Book Vol-III of the Assessee. He further referred to the date of signing of such report by the Chairman of the company, Dr. Pranoy Roy on 30.04.2009. Then he took us to the approval grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that assessee has not disclosed vital information by not complying with provisions of section 212 of The Companies Act, 1956 and therefore, ld DRP has upheld the piercing of the corporate veil in case of the assessee. He further submitted that therefore the AO rejected the books of account of the assessee applying provision of section 145(3) of the act and has assumed jurisdiction u/s 144 of the Act which is correct and in accordance with law on the facts and circumstances of the case. He therefore submitted that now it is unchallenged by the assessee that order is in fact passed u/s 144 of the Act. 22. He further submitted that assessee has also not complied the condition of notice u/s 142(1) as mentioned at page No. 47 and 48 of the draft assessment order. He submitted that the AO issued notice u/s 142(1) on 22.02.2011 asking the assessee to furnish the copies of the balance sheet etc which assessee submitted without the balance sheet, profit and loss account, audit report and Director's report of the subsidiaries. Therefore, there was no submission of any of such documents with respect to subsidiary furnished by the assessee. He further submitted that by noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 144C does not refer to any on the specific section whether section 143(3) or section 144 of the Act, therefore, according to the facts and circumstances of the each case the AO may pass order under any of the above two sections. He therefore, vehemently contested that claim of the assessee that Assessment order has been framed u/s 143(3) is devoid of any merit. 25. Based on the above argument he further referred to the provision of section 253(1)(d) of the Act which provides that an order passed by the AO u/s 143(3), 147, 153A and 153C in pursuance of the directions of the Dispute Resolution Panel can be subject to appeal before the Tribunal. He therefore submitted that there is no mention of orders passed u/s 144 of the Act being appealable before the Tribunal even though they are passed in pursuance of direction of the Dispute resolution panel. He therefore submitted that present appeal of the assessee lacks jurisdiction before the tribunal. In the end he submitted a detailed note on this issue as under:- "The respondent has jurisdiction over the appellant, in respect of which case bearing ITA No.1212/Del/2014, ITA No.2658/Del/2014 & Co.No.233/Del/2014 for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n pursuance of the directions of the Dispute Resolution Panel, which reads as under: "[(d)an order passed by an Assessing Officer under sub-section(3), of section 143 or section 147 [or section 153A or section 153C] in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order;]" It is evident from the provision of section 253 (1) (d) that no appeal is provided against the order made by the AO u/s 144 of the Act in pursuance to the directions of the DRP. 7. As against this, when one looks at the provisions of section 246A of the Act providing appeals before Commissioner (Appeals), it provides appeals against both classes of assessments, that under section 143(3) as well under section 144 when aggrieved against such orders. [It is pertinent to mention here that there is no inherent right of appeal given to an assessee and no right of appeal can be created by way of implication. This view gets support from judgement of Punjab and Haryana High Court in case of CIT v. RamlalMansukhRai (1970) 77 ITR 964 (P&H)]. If the right of appeal is not given by the statute, no appeal will lie,as upheld in following cases: * Hariha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory". d) In Gujarat Agro Industries Co. Ltd. v. Municipal Corporation of the City of Ahmedabad &Ors., (1999) 4 SCC 46812, Honble Apex Court held that the right of appeal though statutory, can be conditional/qualified and such a law cannot be held to be violative of Article 14 of the Constitution. An appeal cannot be filed unless so provided for under the statute and when a law authorises filing of an appeal, it can impose conditions as well. Thus, it is evident from the above that the right to appeal is a creation of Statute and it cannot be created by acquiescence of the parties or by the order of the Court. Jurisdiction cannot be conferred by mere acceptance, acquiescence, consent or by any other means as it can be conferred only by the legislature and conferring a Court or Authority with jurisdiction, is a legislative function. Thus, being a substantive statutory right, it has to be regulated in accordance with the law in force, ensuring full compliance of the conditions mentioned in the provision that creates it. Therefore, the Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce) will not confer any jurisdiction on this Tribunal unless it is provided for in the Income-tax Act by the Parliament. Hence, this Tribunal could not entertain the appeal filed by the Sub Registrar, Meppayur-Kozhikode. 6. Coming to the contention of the ld.DR that appeal is provided u/s 246A(q) of the Act, no doubt, an order imposing penalty under Chapter XXI is appealable before the CIT(A) under section 246A(q) of the Act. Admittedly, section 271FA falls in Chapter XXI of the Income-tax Act. Therefore, one may claim that an appeal is provided u/s 246A(q) of the Act. We are conscious that the CIT(A) is equivalent in rank that of the Director of Income-tax (Intelligence), therefore, the appeal before CIT(A) may not be an effective and efficious remedy available to the Sub Registrar, Meppayur-Kozhikode against whom penalty was levied. However, this Tribunal being a quasi judicial authority established under the Income-tax Act, cannot travel beyond the provisions of section 253 of the Act. Therefore, merely because the remedy available u/s 246A(q) of the Act may not be effective and efficious that alone will not give any jurisdiction to this Tribunal to entertain this appeal. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have considered rival submissions on either side and also perused the material available on record. The question arises for consideration is whether this Tribunal could entertain an appeal by the Sub Registrar, Meppayur- Kozhikode against the order of penalty u/s 271FA of the Act. We have carefully gone through the provisions of section 253 of the Act. Section 253 provides for an appeal before this Tribunal against the orders mentioned therein. For the purpose of clarity, the provisions of section 253 are reproduced hereunder: "253 Appeals to the Appellate Tribunal (1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order (a) an order passed by a Deputy Commissioner (Appeals) before the 1st day of October, 1998 or, as the case may be, a Commissioner (Appeals) under section 154, section 250 section 271, section 271A or section 272A; or (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st Day of January, 1997; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided u/s 246A(q) of the Act. We are conscious that the CIT(A) is equivalent in rank that of the Director of Income-tax (Intelligence), therefore, the appeal before CIT(A) may not be an effective and efficacious remedy available to the Sub Registrar, Meppayur-Kozhikode against whom penalty was levied. However, this Tribunal being a quasi judicial authority established under the Income-tax Act, cannot travel beyond the provisions of section 253 of the Act. Therefore, merely because the remedy available u/s 246A(q) of the Act may not be effective and efficacious that alone will not give any jurisdiction to this Tribunal to entertain this appeal. 7. Further, we are of the considered opinion that when the provisions of section 271FA was introduced in the statute book by the Finance Act, 2004 with effect from 01-04-2005 the consequential amendment to section 253 was omitted to be carried out. This omission may be unintended. One may argue that an appeal is provided against the order of penalty u/s 271 in 253(1)(a) and 253(1)(c) of the Act, therefore, all branches of section 271 i.e. from 271A to 271G are included in section. This argument may not be correct because section 271 is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee computed as aforesaid in the case to which the appeal relates is more than one hundred thousand rupees, but not more than two hundred thousand rupees, one thousand five hundred rupees. (c) Where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than two hundred thousand rupees, one per cent of the assessed income, subject to a maximum of ten thousand rupees. (d) Where the subject matter of an appeal relates to any matter, other than those specified in clauses (a), (b) and (c), five hundred rupees; Provided that no such fee shall be payable in the case of an appeal referred to in sub-section (2) or a memorandum of cross-objections referred to in sub-section (4)". (Emphasis supplied). Sub-section (2A) is conspicuously absent in the proviso to section 253(6) in which event, the Revenue has to pay the institution fees in order to file a valid appeal. 4.1 In the instant case, memorandum of appeal is filed pursuant to directions given by the DRP. A statutory right to file an appeal is provided under sub- section (2A) of section 253 which reads as under: "[(2A)] The Commissioner may, if he objects to any direction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 253(6) was not paid. Since the Memo of Appeal is not accompanied by the fee, as prescribed, we are of the opinion that there is no discretion to the ITAT to accept Memorandum of Appeal filed, in violation of the statutory provisions. ITAT being a quasi-judicial body under the I.T. Act, it has to follow the statutory provisions as prescribed. Under analogous circumstances, while dealing with an appeal filed by an assessee against the order passed under section 271FA, the ITAT, Cochin Bench in the case of Sub-Registrar Office, Meppayur - Kozhikode v. DIT (Intelligence) [2013] 37 taxmann.com 36/[2014] 64 SOT 10 (URO) observed that the Tribunal cannot travel beyond the provisions of the Act and cannot admit an appeal even if the opponent party gives consent permitting the appellant to file an appeal. In otherwords, the consent of a litigant party would not confer jurisdiction on a quasi judicial authority unless and until it is otherwise conferred under the statute." 11.4. The Chennai bench of ITAT examining scope of section 253 in case of Intimate Fashion (India) (P) Ltd. (2013) 31 Taxmann.com 30619 has held as under: "7. The contention of the assessee before us is that as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of power of ITAT u/s 253 of the Act has held as under: -6.1 From the above, it is clear that no power to entertain the appeals against the order passed under s. 271FA, has been provided to the Tribunal. Therefore, the appeals cannot be entertained by the Tribunal. On the other hand, the powers have been given to the CIT(A) under s. 246A(l)(q), which reads as under : "246A(1)(q) : An assessee aggrieved by any of the following orders (whether made before or after the appointed day) may appeal to the CIT(A) against: (q)an order imposing a penalty under Chapter XXI." 6.2 In view of the clear provisions of s. 246A(l)(q) of the Act, an appeal against the order passed under Chapter XXI can be preferred before the CIT(A). The provisions of s. 271FA falls under the Chapter XXI of the Act. Thus, in view of the clear and unambiguous provisions of the Act, these appeals cannot be admitted by us, particularly, when, we have no jurisdiction under the law to entertain such appeals. Consequently, we dismiss all the appeals, for want of jurisdiction." 11.6. Honble ITAT-Delhi bench has also examined power of ITAT u/s 253 of the Act in case of SIS live v ACIT(2016) 65 Taxmann.com1021 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the DRP. 12. Similar is the position about filing a Cross objection by the Department, which is covered under sub-section (4) of section 253. As per this provision amended by the Finance Act, 2012,: 'The Assessing Officer ...., on receipt of notice that an appeal against the order of .... the Assessing Officer in pursuance of the directions of the Dispute Resolution Panel has been preferred under sub-section (1) ..., may, notwithstanding that he may not have appealed against such order or any part thereof; within thirty days of the receipt of the notice, file a memorandum of cross-objections... against any part of the order of the Assessing Officer (in pursuance of the directions of the Dispute Resolution Panel)...... It is manifest that the liberty to file cross objection has been given to the AO u/s 253(4) of the Act only against that part of the order of the Assessing Officer which is in pursuance of the directions of the Dispute Resolution Panel. This provision does not encompass a case of the AO filing cross objection against that part of the assessment order which has not been disturbed by the DRP." 11.7. A careful analysis of above referred to legal jurisprudence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to be dismissed in limine&may kindly be so dismissed as being beyond jurisdiction." 26. The ld DR further submitted a note on appeal u/s 253(1)(d) of the Act as under:- "1. The appellant has jurisdiction over the respondent, in respect of which case bearing ITA No.l212/Del/2014, ITA No.2658/Del/2014 & Co.No.233/Del/2014 for AY 2009-10 are pending for disposal. 2. Facts of the case are stated briefly to have an appreciation of factual and legal issue involved in the order of the Assessing Officer (the AO) in case of M/s NDTV for AY 2009-10 u/s 144 r.w.s. 144 C(13) of the Act dated 21.02.2014. The assessee company filed its return of income for AY 2009-10 on 30.09.2009 declaring loss of (-) Rs. 64,83,91,422/-. The return was processed u/s 143(1) of the Act. Later on, the case was selected for scrutiny assessment by issue and service of notice u/s 143(2) on 19.08.2010 followed by issue of several notices u/s 142(1) of the Act. During course of scrutiny assessment proceedings, the assessee furnished partial information and did not comply with terms and conditions of notices u/s 142(1) of the Act on certain issues. The assessee was also found contravening provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced a conditional order dated 03.07.2009 of the Ministry of Corporate Affairs which exempted from attaching the details of subsidiaries with its balance sheet and other accounts in terms of provision of sub-section 8 of Section 212 of the Companies Act, 1956. The AO has pointed out that even this order of the Ministry of Corporate Affairs was not fully complied with The assessee is a listed company. The disclosure of accounts prescribed by Security and Exchange Board of India (SEBI) was not adhered to in spite of the fact that the assessee has committed so to do under listing agreement with Stock Exchange. The order of the Ministry of Corporate Affairs was issued on 03.07.2009 whereas the audited accounts of the assessee was finalised much before that. In any case, this order exempting the assessee was not retrospectively operative. Therefore, the lapses or omissions of not making full and true disclosure in the audited accounts of the assessee were not condoned by the exemption order of Ministry of Corporate Affairs. 5.4. The AO had asked for details about these transactions through her letters during the course of the assessment proceedings. The AO has mentioned that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 28.02.2014 in conformity with the directions of the DRP by determining total taxable income of Rs. 838.33 crore. 3. The assessee filed an appeal against the said the assessment order of the AO u/s 144 r.w.s. 144C (13) of the Act before Hon'ble ITAT u/s 253(l)(d) of Act, even when no appeal against the order passed by the AO under section 144 of the Act in pursuance to the direction of the DRP is provided u/s 253(l)(d) of the Act. For shake of clarity relevant provisions of clause (d) of sub-section (1) of section 253 of the Act is reproduced as under: "an order passed by an Assessing Officer under sub-section (3), of section 143 or section 147 [or section 153A or section 153C] in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order" 4. In this case the AO assumed jurisdiction u/s 144 of the Act by taking into account non-compliance of terms and conditions of the notice u/s 142(1) of the as well as by rejecting books of A/c of the assessee u/s 145(3) of the Act. It is pertinent to point out that even in the appeal bearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued u/s 145(3) to the assessee to show cause as to why books of accounts of the assessee should not be rejected and assessment of the company should not completed u/s 144 of the Act. ? In response to the notice, the assessee argued that it was exempted u/s 212(8) of Indian Companies Act, 1956 to attach the details of annual audited accounts of the subsidiary companies. The claim of the assessee cannot be accepted for following reasons: * It is evident from the paragraph 4 of accounting standard as notified u/s 145(2) of the Act that the assessee was required to make complete disclosure of all the material items including information about all the material facts including transactions governed by substance over form. For the sake of clarity the relevant part of notified accounting standard are reproduced as under: "4. Accounting policies adopted by an assessee should be such so as to represent a true and fair view of the state of affairs of the business, profession or vocation in the financial statements prepared and presented on the basis of such accounting policies. For this purpose, the major considerations governing the selection and application of accounting policies a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by their substance and not merely by legal form. However, the assessee neither followed the disclosure norms nor had disclosed audited A/c, balance sheet, profit & loss A/c and annual report of subsidiary paper companies in the return of Income of the NDTV Ltd. 10. Sub-sections (3A), (3B) and (3C) in section 211 of Companies Act 1956 (w.e.f Oct. 31, 1998) stipulate the profit and loss account and the balance sheet have to comply with accounting standards. For this purpose, the expressions "Accounting standards" shall mean to be the standards of accounting recommended by the Institute of Chartered Accountants as may be prescribed by the Central Government in consultation with National Advisory Committee on Accounting Standards constituted under section 210A of Companies Act 1956. Thus, the Accounting Standards are prescribed by the Central Government and Accounting standards are now mandatory qua the companies and non-compliance with these standards would lead to violation of section 211 of the Companies Act in as much as the annual accounts may then not be regarded as presenting a "True and fair view". It is evident from the order of the AO that the assessee had not followed se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee; or (c) Accounting standards as notified by Central Government has not been regularly followed by the assessee In this case, it is evident from discussion in proceedings paragraphs that the assessee had not followed Accounting Standards as notified by Central Government. Accordingly, the AO had correctly rejected books of account u/s 145(3) of the Act. Whether the AO was justified in framing assessment u/s 144 read with section 144C(13) of the Act 1961 13. In a case where the provisions of section 145(3) are attracted, the AO is entitled to make an assessment in the manner as provided in section 144. Provisions of section 144 stipulate that the AO after taking into account all the relevant material which AO has gathered shall, after giving the assessee an "opportunity of being heard" make the assessment of the total income or loss to the best judgement and determine the sum payable by the assessee on the basis of such assessment. The Proviso to section 144(1) further explaining term used "opportunity of being heard" stipulates that such opportunity shall be given by the AO by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2011) 335 ITR 523 (Jhar) For the reasons mentioned in above paragraph 4 to 17, it is concluded that the AO was legally justified in passing assessment order u/s 144 read with section 144C(13) of the Act. 18. Issue 1: Whether order of the AO u/s 144 r.w.s. 144C(13) is barred by limitation * In this case, the assessee filed return of income on 30.09.2009 and later on a reference was made to Transfer Pricing Office u/s 92CA(1) of the Act, accordingly, as per second Proviso to section 153(1) the time limit to complete assessment was 31.03.2013. Since, in this case, the AO had proposed variation in the return income of the assessee included variation in the return of income as a consequence of the order of the TPO u/s 92CA(3) the provisions of section 144C were applicable, accordingly, the AO frame a draft assessment order on 30.03.2013 within time limit as stipulated in second Proviso to section 153(1) and further time limit to pass the order as stipulated u/s 144C was followed by the AO. In view of these facts, it is incorrect to argue that last date of passing final assessment order in this case was 31.03.2013 as against this in this case last date to pass order in compliance to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment was issued on 31.03.2013 u/s 144/144C(1) of the Act proposing taxable income of Rs. 641.08 crore as against declared loss of Rs. 64.83 crore . (It is to clarify here that due to typographic mistake on first page of the order, section 143(3)/144C(1) of the Act was wrongly mentioned as against correct section 144/144C(1) of the Act.) The assessee filed objection u/s 144C before Hon'ble Dispute Resolution Panel (the DRP) against the proposal of the AO to finalize assessment at Rs. 641.08 crore as against declared loss of Rs. 64.83 crore u/s 144 of the Act. The DRP heard the assessee and examined additional evidences field by the assessee and caused further enquiries to be made u/s 144C(7) by directing the AO to send remand reports. The DRP, taking into account proposal of additions to income in draft assessment order, submissions by the assessee, remand reports of the AO and non-submission of the information by the assessee on certain points, issued directions u/s 144C(5) of the Act to the AO on 31.12.2013. It is pertinent to mention here the assessee did not challenge assumption of the jurisdiction by the AO u/s 144 of the Act, however, it did take a ground against rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to summons issued by the Department in December 2010 nor in response to notice issued in February 2013, a reasonable belief was formed that the accounts of the assessee are not maintained and prepared in accordance with the Accounting Standards issued by the Central Government and were therefore incomplete and incorrect based upon which the true and correct income of the assessee liable to tax cannot be determined." 5.5. A show cause notice was issued by the AO to the assessee u/s 145(3) of the IT Act r/w relevant sections of the Companies Act by stating 'why the books of accounts should not be rejected' in accordance with Section 144 of the IT Act and why the assessment should not be concluded under that section. Further, the AO also contended that the assessee has also failed to comply with the requirements of Income Tax Act as well. On Page 46 to 48 of the draft assessment order, the AO has given reasons for rejection of the books of accounts of the assessee and why best judgment assessment u/s 144 of the IT Act is warranted in this case. The AO issued show cause notice to the assessee before resorting to Section 144 of the IT Act." (Emphasis supplied) Further, in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further provided that provisions of Proviso to section 144(1) shall not apply where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section. * In this case, the AO, after rejecting books of A/c u/s 145(3) and taking note of non-compliance to terms and conditions of the notice u/s 142(1), assumed jurisdiction u/s 144 of the Act as discussed in last paragraph on page 48 of the draft assessment order. However, due to typographical mistake on first page of draft order, section 143(3) read with section 144C was written instead of correct section 144 read with section 144C(1). However this rectifiable mistake was corrected as evident from directions of DRP u/s 144C(5) of the Act. (in this regard, paragraph 2.2.1 of the assessment order may be referred to). * It is evident from above discussion that the assessee had neither complied with the terms and conditions of the notice u/s 142(1) nor had followed accounting standards as notified by Central Government, accordingly, the AO assumed jurisdiction u/s 144 of the Act and finalized assessment proceeding u/s 144 read with section 144C of the Act. This leads to an irresistible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 1.2 Vide notice u/s 142(1) dated 15.02.2013, the AO specifically required the assessee to furnish Balance Sheet, Profit & Loss account, Audit Report, Notes on accounts along with supporting annexures in respect of all subsidiaries of the assessee. The information was sought by 22.02.2013. In response, vide letter dated 27.02.2013, the assessee furnished information regarding subsidiaries, but the information regarding NDTV Networks Pic, UK ("NNPLC") was not enclosed, although it was incorrectly written in the forwarding letter that information regarding NNPLC was enclosed. 1.3 Vide further reply dated 11.03.2013, the assessee filed copies of Balance Sheet and Profit & Loss account of NNPLC, but the 'Notes on accounts', which is the key to understanding the financials, was not furnished. The 'Notes on accounts' of NNPLC was not furnished by the assessee even till the completion of the assessment proceedings. 1.4 The AO therefore issued show cause notice u/s 145(3) on 28.03.2013 specifically pointing out that the requisite information had not been furnished by the assessee. In response, vide reply dated 28.03.2013 filed on 30.03.2013, the assessee stated that the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1956. (viii) Copy of confirmation letter dated 01.08.2013 from USB V. 2.2 However, the information regarding the investors in US $ 100 million Step Up Coupon Convertible Bonds due in 2012 was not provided by the assessee even before the DRP, although the assessee had made an addition of Rs. 110 crore to the amount reflected under such Bonds in its accounts, on the ground that the addition had been made not on account of any fresh infusion, but on account of forex adjustment. However, only names and addresses of 8 investors were provided before the DRP and no evidence regarding the identity of investors, their creditworthiness or genuineness of transactions was provided even before the DRP. This is inspite of the fact that most of the investors came from tax haven jurisdictions." 27. The ld AR in rejoinder submitted that the assessee filed return of income on 30.09.2009 and the Transfer Pricing Officer passed u/s 92CA(3) on 30.01.2013 and consequently draft assessment order was passed on 31.03.2013 wherein, the ld Assessing Officer himself has mentioned that order is passed u/s 143(3) of the Act. He further referred to page No. 914 of the paper book, which is Form NO. 35A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were printed on 22.07.2009 and therefore, by that date the approval was available. Hence, he submitted that allegations of the Revenue with respect to the dates is incorrect and irrelevant for deciding whether the accounts are correct and complete. He further submitted note dated 04.07.2017 to address the above controversy as under:- 1. That at the time of hearing, on 04.07.2017, the appellant had been directed to provide the copy of the minutes maintained under the Companies Act, 1956 for adoption of the consolidated Financial Statement for the Financial Year 2008-09 on 30.04.2009, and thereafter the hearing was adjourned to be continued at 2.45PM on the same date. 2. That appellant at the outset respectfully submits that the pages 17461859 of Paper Book Volume-V, is the copy of the annual report of the appellant company. It comprises of the following: a. Copy the index to the annual report (page 1746-1748); b. Details of Board of Directors, Auditors, Compliance Officer, Company Secretary, Performance indicators (Page 1749-1753); c. Letter to shareholders dated 22.07.2009 (Pages 1754-1755); d. Directors Report dated 30.04.2009 (Pages 1757-1764); e. Corporate Governance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. It is also submitted that even the learned AO has found no defect whatsoever in the consolidated financial statement of the appellant company. In view of the above and the fact that exemption granted on 03.07.2009 was available on the date of AGM held on 22.07.2009, it is most respectfully submitted that the contention of the revenue to invoke section 145(3) of the Act on the pretext of section 212(8) of the Companies Act has no valid justification. 9. It is also clarified that as the accounts of all the companies were audited before 30.04.2009 and consolidated accounts were also prepared, inadvertently in corporate governance report it was stated that the Government of India has granted approval waiving the publication of the financial statement of the subsidiaries. In the application was made on 08.05.2009 and approval was also granted on 03.07.2009, as stated aforesaid which is prior to the AGM and also the date of filing of the return for the instant year and much prior to the draft of the proposed order of assessment dated 31.03.2013. 10. Further, as directed by the Hon'ble Bench, copy of the minutes maintained under the Companies Act, 1956 shall be produced in origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at since the learned Assessing Officer had expressly invoked the provisions of section 145(3) of the Act and rejected books of account of the appellant company, the assessment had been made u/s 144 of the Act. It is submitted that if it is so, then the said order cannot be regarded as any draft order under the Act. It is submitted that when an assessment is made u/s 144 of the Act, the same is not subject to section 144C of the Act since while framing an assessment u/s 144 of the Act, he had to compute income to the best of his judgment and determine sum payable on the basis of such assessment; whereas in order dated 31.3.2013 he had stated the order to be draft order and no such sum was determined by him. There is a conceptual difference between an order where an assessment has been made to best of his judgment and a draft order 41.4 It is submitted that where a draft assessment order is made sum of tax payable is not determined and therefore in absence of any determination of tax, the draft order of assessment is not an order u/s 144 of the Act. It is submitted that this is also evident from provisions contained in section 145(3) of the Act, which read as under: "(3) W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT vs. Purshottamdas T. Patel reported in 209ITR 52 wherein it has been held as under: -In our opinion, this decision, far from helping the Revenue, goes against it. The Supreme Court has in terms stated that assessment is one integrated process involving not only the assessment of the total income but also the determination of the tax. It has further observed that the latter is as crucial as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete. What section 153 requires is that the assessment should be completed within the prescribed time-limit. The words "Order of assessment" cannot be construed to mean assessment of total income only. Those words would mean an Order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an Order in writing in respect of both these things is passed, it can be said that there is a complete Order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the eligible assessee, Within 30 day of receipt of the draft order the assessee is entitled to filed his acceptance of the variation to the AO or objection to such variation before the ld DRP. If the assessee accepts the variation or ld DRP does not receive such objection on the draft assessment order within 30 days of receipt of draft assessment order, the AO shall complete the assessment on the basis of draft order within one month from the end of the month in which the acceptance is received or period of filing of objection expires. The ld DRP on the objection shall issue the direction after considering the draft order, objections of the assessee, evidences furnished by the assessee, report of authorities, records of the draft order, evidence collected, and result of enquires made. The ld DRP is further empowered to make or cause further enquiry. Consequently, it may confirm, reduce, or enhance the variation proposed in the draft order but it has no power to set aside any proposed variation. Every direction issued by the ld DRP are binding to the Assessing Officer subject to the provisions of right of appeal to the Assessing Officer for some intermittent period before the tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1978 (4) ALR 753. In view of this we reject the contention of the ld AR that as the Assessing Officer has mentioned reference to Section 143(3) while making draft assessment order, so the draft order is not u/s 144 of the act but u/s 143(3) of the act. Even the provisions of section 144C does not provide that draft assessment order is required to be passed u/s 143(3) or u/s 144 of the Act. According to us the draft assessment order is required to be passed u/s 144C(1) of the Act. it is further to be noted that it is not the 'draft order' but it is draft of the proposed order of assessment. Therefore, there is no requirement of mentioning any sections by the Assessing Officer except 144C(1) in the draft of the proposed order of assessment. It is further required to be noted that the draft of the proposed order of assessment is altogether different from the assessment order as such draft does not include the notice of demand but also does not have any enforceability of tax dues from the assessee where as the assessment order has such ingredients and it is accompanies with notice of demand u/s 156 of the act. According to us the draft of the proposed assessment order is just like a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised and investment made by M/s New Delhi Television Ltd. and its subsidiaries after 01.04.2006. In regard to overseas investment approval/ sanction/intimation given/made to/by the relevant regulatory authority i.e. RBI, FIPB(furnish a copy of it). (4) Details of shares sold and purchased by M/s New Delhi Television Ltd. and its subsidiaries alongwith their amount since 01.04.2006 with documentary evidence. (5) PAN and IT Returns of these subsidiaries since 01.04.2006. The assessee was directed to attend the office of the ADIT(Inv.) along with the above called for information on 31.12.2010. On that date no information was provided by the assessee and on behalf of M/s RRPR Holding Pvt. Ltd. a request was made for adjournment which was allowed and case was adjourned for 17.01.2011. Similar request was made by the assessee company and case was adjourned for 17.01.2011. However, on the next date also no information was provided by the assessee. It is seen that the assessee company is having at least 21 subsidiaries as recorded by Ministry of Corporate Affairs OM No. 47/469/2009-CLIII dated 03.07.2009. However the documents as prescribed under section 212 of the Indian companies A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment and were therefore incomplete and incorrect based upon which the true and correct income of the assessee liable to tax cannot be determined. In view of the above situation, a show cause notice was issued to the assessee under section 145(3) of IT Act, 1961 r.w. Provisions of Sections 209,210,211 and 212 of the Indian Companies Act, 1956 asking the assessee to explain why the books of accounts of the assessee not in accordance with the provisions of section 145(3) of the IT Act, 1956 be rejected and assessment of the assessee company is completed in accordance with the provisions of section 144 of the IT Act, 1961. The said notice was served upon the assessee by fax on 29.03.2013 and in view of the scheduled limitation on 31.03.2013 assessee was requested to submit its reply by 30.03.2013. The reply of the assessee was duly received on 30.03.2013 whereby it was stated by the assessee that the assessee company was exempted to attach the details of subsidiaries with its balance sheet and other accounts in terms of the provisions of sub-section 8 of section 212 of the Indian Companies Act, 1956 and for the first time a copy of the said permission granted by Central Government w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s annual accounts that were finalized on 30.04.2009 renders the accounts of the assessee to be incomplete and incorrect and contrary to the Indian Accounting Standards-1, 7,12, 18, 19, 24, 27, 28, 33 and 107 as issued by the Central Government from time to time and being in vogue during the relevant accounting period and when the accounts of the assessee were finalized and approved by the Board of Directors of the assessee company i.e. on 30.04.2009. Vide its letter dated 30.03.2013 the assessee vide para 8 contended that section 145(3) of the Act, talks about correctness or completeness of the accounts of the assessee only and not of its subsidiary or affiliates and therefore the provisions of section 145(3) were claimed to be applicable only in cases where the accounts of the assessee on stand alone were not complete and correct. The contentions of the assessee is not maintainable as the provisions of section 212(1) of the Indian Companies Act, 1956 prescribed that accounts of the subsidiaries as well as reports prescribed therein are to be attached with accounts of the holding company and in the instant case the assessee being the holding company, it was mandatory to attached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged its primary onus in terms of section 68, 69A and other applicable provisions. Vide para 2 of the letter dated 30.03.2013 of the assessee, it was admitted that no independent valuation for determining the value of the shares of the subsidiaries of the assessee was carried out or obtained by the assessee. The subscription price was a negotiated price arrived between the parties based on proposed business potential and business forecast and projections. From the above it is more than clear that the money received by the assessee through its subsidiaries was not as per the fair value of the shares proposed to be transferred and the requirements of Indian Accounting Standard 18 as also elsewhere which defines the fair value "the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction" has not been complied with and the said transaction is merely colorable exercise to cover up the trail of money. " In view of the above, it is held that assessee has failed to discharged its primary onus cast upon it and therefore the entire amount received by the assessee through its subsidiaries and through an ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 212 of the Companies Act 1956 of those companies were not attached with the balance sheet of the a company. It is further observed by the AO that accounts of the assessee were not complied by making necessary disclosure in terms of accounting standard 24, 7, 12, 18, 19, 27, 28 and 33. According to the Assessing Officer it was material information, which was required under the law to be attached with the balance sheet of the assessee, was not at all attached and therefore the accounts of the assessee are not complete and correct. Notices were also issued to be assessee in February 2013 for compliance for submitting the balance sheet of its subsidiary companies. Therefore the AO was of the view that accounts of the assessee were incomplete and incorrect. Hence, he invoked the provisions of section 145(3) of the Act due to non-compliance of provision of section 209, 210, 211 and 212 of the Indian Companies Act, 1956. As the ld Assessing Officer has invoked the provisions of section 145(3) of the Act as he is not satisfied about the correctness and completeness of the accounts of the assessee, he is required to make the assessment in the manner provided u/s 144 of the act. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision of the companies act unless exempted. 37. The provision of section 212 of Companies Act 1956 provides with respect to the disclosure of the particulars of the subsidiary are as under:- "212. (1) There shall be attached to the balance sheet of a holding company having a subsidiary or subsidiaries at the end of the financial year as at which the holding company s balance sheet is made out, the following documents in respect of such subsidiary or of each such subsidiary, as the case may be : (a) a copy of the balance sheet of the subsidiary; (b) a copy of its profit and loss account; (c) a copy of the report of its Board of directors; (d) a copy of the report of its auditors; (e) a statement of the holding company s interest in the subsidiary as specified in sub-section (3); (f) the statement referred to in sub-section (5), if any; and (g) the report referred to in sub-section (6); if any. (2) 55[(a) The balance sheet referred to in clause (a) of sub-section (1) shall be made out in accordance with the requirements of this Act, (i) as at the end of the financial year of the subsidiary, where such financial year coincides with the financial year of the holding co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to any shares in a subsidiary for the time being held by the holding company or any other of its subsidiaries shall not (for that or any other purpose) be treated as aforesaid so far as they are profits or losses for the period before the date on or as from which the shares were acquired by the company or any of its subsidiaries, except that they may in a proper case be so treated where (a) the company is itself the subsidiary of another body corporate; and (b) the shares were acquired from that body corporate or a subsidiary of it; and for the purpose of determining whether any profits or losses are to be treated as profits or losses for the said period, the profit or loss for any financial year of the subsidiary may, if it is not practicable to apportion it with reasonable accuracy by reference to the facts, be treated as accruing from day to day during that year and be apportioned accordingly. (5) Where the financial year or years of a subsidiary referred to in sub-section (2) do not coincide with the financial year of the holding company, a statement containing information on the following matters shall also be attached to the balance sheet of the holding company: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of this section are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 57[ten] thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully." 38. On reading of the above provision, it is apparent that the balance sheet of the holding company i.e. the assessee, must have details of the subsidiary as prescribed. The requirement of reconciling the financial year of the subsidiary and holding company is also mandatory, further the profit and loss account, report of the board of directors, and of auditors of those subsidiaries are required to be prepared according to the provisions of the companies Act, 1956. It is also mandatory in case of foreign subsidiaries. Further, a statement is required to be prepared of the holding company's interest in the subsidiary, as well as other details shall be signed by the person by whom the balance sheet of the company is required to be signed. The provision of sub-section 9 also prescribe a punishment with imprisonment up t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 31.03.2009) (underline supplied by us) 41. Now the ld Departmental Representative has submitted before us the copy of approval obtained by the assessee u/s 212(8) of the companies Act 1956 for the Financial year ended on 31.03.2009 from the Ministry of Corporate Affairs. To our utter surprise the approval of the Ministry of Corporate Affairs was granted to assessee only on 3.07.2009 but in the Director's report dated 30.04.2009 Chairman of the company Dr. Pranoy Roy has disclosed to all the regulatory authorities such as SEBI and stock exchanges that approval has already been granted by the Ministry of Corporate Affairs. In fact the application for such approval was made only on 8th May 2009. Further, the above exemption was also subject to the following six conditions:- "I. The company will present in the annual report the consolidated financial statement of it is subsidiaries duly audited by the statutory auditors. II. The consolidated financial statement will be prepared in strict compliance with the accounting standard and listing agreement as prescribed by SEBI III. Following information in aggregate for each subsidiary should be disclosed in one page of the consolidate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval even when there was no application was made to the concerned authority and such a blatant violation of law involving the fiscal and corporate liability of the assessee go unnoticed so far. However, the tribunal in the present case except expressing anguish cannot cross the limits laid down by the law. It is for other regulatory and supervisory agencies to get alarmed with such an act. In view of these glaring facts we do not have any hesitation to say that the conduct of the assessee shows that assessee had never an intention to disclose the details of its subsidiary companies and its financial transactions to its stakeholder and to regulatory authorities including the Income tax Authorities. Our statement also gets fortified by our other observations in this order. 44. The provision of section 144 of the Act prescribes four conditions under which the ld AO can make the best judgment assessment. The provisions are as under:- "BEST JUDGMENT ASSESSMENT Section 144 If any person-- (a) fails to make the return required under sub-section(l) of section 139 and has not made a return or a revised return under sub-section(4) or sub-section(5) of that section, or (b) fails to com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the opinion that the assessee has failed to comply with all the terms of the notice issued u/s 142(1) of the Act and therefore, the AO rightly assumed powers u/s 144 of the Act. 46. According to provisions of section 144(1)(b) if the assessee fails to comply with the all the terms of the notice issued u/s 142(1) then the ld Assessing Officer after taking into account all revenant material which he has gathered make the assessment of the total income or loss of the assessee to the best of his judgment. In the case where the notice u/s 142(1) has been issued to the assessee prior to the making of an assessment under the section, no further opportunity is required to be given to the assessee. As during the course of assessment proceeding the assessee has failed to comply with all the term of the notice issued u/s 142(1) the Assessing Officer cannot be found at fault for invoking the provisions of section 144 of the Act. Therefore , the ld Assessing Officer not satisfied with the completeness and correctness of the account of the assessee is duty bound to make an assessment in the manner provided u/s 144 of the Act and further as the assessee has failed to comply with all the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-General or a Director under section 272A ; or (d) an order passed by an Assessing Officer under sub-section (3) of section 143 or section 147 in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order. (e) an order passed by an Assessing Officer under sub-section (3) of section 143 or section 147 or section 153A or section 153C with the approval of the Commissioner as referred to in sub-section (12) of section 144BA or an order passed under section 154 or section 155 in respect of such order. (f) an order passed by the prescribed authority under sub-clause (vi) or subclause (via) of clause (23C) of section 10." 49. The orders passed according to the clause (d) are an order passed by the AO under section 3 of section 143 or section 147 or section 153A or section 153C in pursuance to the direction of the Dispute Resolution Panel or an order passed u/s 154 with respect to such orders are appealable. According to us the order passed u/s 144 of the Act pursuance to the direction of the Dispute Resolution Panel does not find place as an appealable order before the tribunal. It is also an accepted proposition of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue) 53. The first ground of appeal is with respect to the disallowance of Rs. 415441111/- being commission paid to advertisement agency disallowed because of the reason of non-deduction of tax at source. During the year the assessee has shown total sales of Rs. 2354166296/- and the assessee was asked to furnish the details of commission paid to advertisement agency and tax deduction at source made thereon. The assessee submitted a detailed reply before the AO contesting that no tax is required to be deduced , however, the ld Assessing Officer has rejected the contention of the assessee and held that tax should have been deducted on such sum and disallowance of Rs. 415441111/- was proposed by giving following reasons in the draft assessment order:- "The reply of the assessee has been considered and is not found tenable. The assessee has relied upon the case of CIT Vs Living Media India Ltd (supra), which is clearly distinguishable from the facts in the present case of the assessee. The same are enumerated hereunder:- In the case of Living Media, the assessee was a publisher of magazines like India Today, Business Today etc., and was a principal on its own. It did not carry out d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s TLG India Private Limited by NDTV Ltd. (assessee) wherein the client reference / caption was Jet Airways (I) Limited, for advertisement in the different programmes of NDTV Ltd. Invoice of gross amount of Rs. 28,75,600/- was raised; Agency Commission was deducted of Rs. 4,31,340/- and net amount of Rs. 24,44,260/- + service tax, education cess and secondary cess, was shown to be receivable from the client through the Agency i.e. M/s TLG India Private Limited (Agency). The details have already been reproduced in para above. It is clear from the above invoice that the transaction is between assessee and the ultimate client i.e. owner of Jet Airways (I) Limited through the Agency i.e. TLG India Private Limited. The payment of gross amount' is remitted by the ultimate client to the Agency, which, after deducting its 15% commission, remits the net amount to assessee. In any case, the Agency is only acting in the capacity of facilitator and providing services both to the advertiser and as well as assessee. For these services, the Agency is being remunerated at the specified rates i.e. 15% commission as mentioned in the invoices. It is immaterial as to whether assessee makes p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unerated @ 15% of gross amount as is clear from the billing, the only difference1 is that instead of reflecting a gross amount in its books (e.g. Rs. 28,75,600/- in the sample voucher of TLG India Private Limited, then deducting commission of Rs. 4,31,340/- @ 15% of gross amount of Rs. 28,75,600/- the assessee is directly booking net amount of Rs. 24,44,260/- in its books of accounts. However, this is'only a financial arrangement arrived at between assessee and the agent and it cannot be denied that expense has been incurred by the assessee, the only difference being that it is not in the form of direct payment to Agent, but rather in indirect form e. the Agent withholds amounts due to it and remits the balance to the assessee. This in no way takes away from the expenditure incurred by the assessee as the remuneration in the form of commission/discount received by the agent flows from the payments received by it. From the above discussion it is amply clear that the assessee was fastened with expenses of commission which instead of being borne by it by way of actual payment has been withheld by the Agency before remitting net amount to the assessee and can be termed as Construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sand five hundred rupees. Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section. Explanation - For the purpose of this section,- (i) "Commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services)or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities: (it) The expression "professional services" means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of commission. Thus, the assessee was obliged to deduct tax at source the payment to agents or amount withheld by agents. More so, CBDTCircular No. 715 dated 08.08.1995 also specifies that commission received by the Advertising Agency from the Media would require deduction of tax at source u/s 194J. Furthermore, reliance is placed on the following decisions, which are directly related to the crux of the matter under consideration :- 1) CIT Vs Director, PrasarBharti (Kerala High Court) 2) CIT Vs Singapore Airlines !TANos 306/2005 & 123/2006 dated 13.4.2009(Delhi High Court). 3) CIT Vs Idea Cellular Ltd ITA Nos 145/2009 & 784/2009 dated 19.2.2010 (Delhi High Court). 4) ACIT VsBharti Cellular Ltd ITA No 1678 & 1679/Kol/2005 dated 4.4.2006 (ITAT, Kolkata Bench.) 5) Bharti Cellular Ltd Vs ACIT (2011) 12 Taxmann 30 (Cal.) (High Court of Calcutta) 6) Vodafone Essar Cellular Vs ACIT dated 17.8.2010 (Kerala High Court) 7) Around the World (268 ITR 477 (Mad.) 8) Tube Investment (223 CTR 99). The important aspects decided by Hon'ble Courts are discussed hereunder:- The Kerala High Court in the case of Commissioner of Income Tax, Thiruvananthapuram vs. Director, Prasar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he is free to appropriate as his income. TDS on the commission charges of 15 per has to be paid by the respondent to the income tax department with reference to the date on which 85 per cent of the advertisement charges are received from the agent. In fact, it is only to comply with the provision, clause 2(e) extracted above is incorporated in the agreement wherein it is stated that agent will pay to the Doordarshan through DD or cheque the TDS amount payable on the commission retained by agents which we have already found as payment of commission by the respondent to the agent." In the case of CIT Vs Singapore Airlines Ltd., & Others reported in ITA No 306/2005 & 123/2006, judgment delivered on : 13.4.2009 (Delhi High Court) the relationship between principal and agent has been dwelt upon in detail. It has been held by the Hon'bie jurisdictional High Court that once an obligation is cast, it is for the assessee to retrieve the necessary information from the agents (travel agent) who works for the assessee and to deduct TDS on the actual income received by the agent on sale of such items. Even though the said judgment related to airline-travel agent case, but relevant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he represents, and the third parties; (iii) An agent, though bound by instructions given by him by the principal does not work under the direct control and supervision of the principal. The agent thus uses his own discretion to act on behalf of the principal subject to the limits to his authority prescribed by the principal. (iv) There is no necessity of a formal contract of agency, it can be implied which could arise from the act of parties or situations in which parties are put. It is also the case of Revenue the essential ingredient of principal to agent as defined in Section 182 of Contract Act are all present in the case of the assessee, which is enumerated hereunder :- RELATIONSHIP BETWEEN PRINCIPAL AND AGENT (i)The agent makes the principal answerable to third persons whereby the principal can sue third parties directly and renders himself, that is, the principal, liable to be sued directly by the third parties In the case of the assessee, advertisements are being received through agents, apart from other direct modes. In so far as advertisements booked by assessee through agents from advertisers, the assessee is liable to publish the material/advertisement as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the assessee. In view of the fact, relying upon the decision of Honble High Court: is concluded that the payment retained by the agent is inextricably linked to the advertisement to be published by the assessee, it cannot but lead to a that the payment retained by the agents is a commission within the meaning 194H of the Act. This is especially so, as indicated above, at no point in time obtains proprietary rights to the advertisement, it is clearly not a case of disc case since there is no value or price paid by the assessee on which the a deduction. The price or value is received by the assessee company through the medium of the agent from the advertisers which is also one of the facets of services offered by the agents. The price or value of the advertisement to be published in the media received from the advertisers by the agents for and on behaif of the assesse is held in trust. Thus, the money retained by the assessee is commission within the meaning of Section 194H of the Act and in no stretch of imagination this can be termed as 'trade discount'. To say that the revenue is seeking to cast the liability on the assessee tax when there is no evidence of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the profit to the principal. (e) Commission generally denotes the compensation which an agent receives on Sales. (f) Commission is compensation paid to another for services rendered in the handling of another's business or property and based proportionately upon the amount or value thereof. (g) The Hon'ble Court in the above cited case has given a passing remarks, that if the principal is asked to deduct tax at source in respect of commissions paid to their agents, it does not affect the principals. The concerned agent can always file their income tax returns and claim the credit for the payments already made on their behalf by theassessee. On the other hand, such a provision serves public purpose inasmuch as viz.,such distributors who would be otherwise liable to pay tax, but are evading the tax, would come under the Income Tax Act. This is only a passing remarks, which justifies the incorporation of such a provision like putting obligation on the payer to deduct the tax at source and the view we have taken subserves this rationale behind such a provision as well. Applying the said ratio to the present case, it is seen that in the instant matter too, the amount wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31,340/- under the head agency commission in the profit and loss account. The net effect would be offering income of Rs. 24,44,260/- in P&L a/c. Instead, the assessee has straight away credited the net amount on Rs. 24,44,260/- in the receipts side. What has missed is that the expenditure of Rs. 4,31,340/- which is supposed to be routed through profit and loss account is shadowed and omitted to be debited in the net income but it does not mean that the said expenses have not been incurred. The provisions of Sec 40 as discussed supra contain the expression 'following amounts shall not be deducted in computing the income chargeable under the head ...'. The word 'deducted' in the section is not followed by the word in 'profit and loss account'. The intent of Legislature is very clear that even if the gross amount is 'deducted' by any sum, which is not shown directly in the P&L a/c, net effect will be same and carries the same meaning as if it has been routed through profit and loss account. Let us see this in a mathematical manner. Suppose the Gross receipt of an assessee is say Rs. 100/-, he expended a sum of Rs. 20/-related to earning of such grqss am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details have been furnished by assessee. Therefore considering the 15% commission paid by the assessee, as per assessee's letter dated 07.03.2013, on a revenue of Rs. 235,41,66,296/- the grossed up revenue comes to Rs. 276,96,07,407/- and commission on the gross revenue @15% comes to Rs. 41,54,41,111/- which has been paid by the assessee. In view of the facts as discussed in the foregoing paragraphs it is clear that the transactions (on which discount as claimed by the assessee) was not paid on principal to principal basis but was in the nature of principal- agents for the services rendered to 3rd parties, and by no stretch of imagination can be termed as discount and the assessee has itself in its invoices categories the said amount as commission. Therefore, the discount (as claimed by assessee) paid by the assessee is nothing but agency commission liable for deduction of TDS either in section 194H or 194J or both. However, it has not deducted the TDS at all on such amount. Therefore Rs. 41,54,41,111/- is disallowed u/s 40a(ia) of the Income Tax Act., 1961 and added to the income of the assessee. In this context, the assessee may plead that no amount of Commission has actuall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt IBF) for electronic. An advertiser engages an advertising agency and the advertising agency in turn approaches print and electronic media for publication/broadcast of the advertisement. There is no direct link between the print and electronic media and the advertiser. In the normal course when orders are released by the advertising agencies, the name of the client is always disclosed on it, though there is no principal agent relationship between the print and electronic media on one hand and the advertising agencies on the other hand. As per the rules of INS, accreditation is awarded by INS to the advertising agency which becomes eligible to receive 15 per cent discount from media companies on procuring advertisement space for/time in publication/broadcast for advertisers. It may be noted that even the discount is not at the will or contractual discretion; it is governed by INS regulations." DRP has carefully examined the above issue. DRP is convinced that the decision of the Hon'ble Jurisdictional High Court in the case of Living Media India Ltd. is applicable in this case since the issue is of treatment of commission paid to the advertising agencies. Therefore, the AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een incurred under the head subscription, uplinking and news service charges. Vide order sheet dt.15.02.2013, the assesses was required to furnish the details regarding TDS on uplinking and transmission charges. The assessee in its reply dt. 11.03.2013 and 22.03.2013, submitted that the payment has been made to a foreign company and in view of the decision of Hon'ble ITATDelhi, in DCIT vs. PanAmSat International System Inc. 103 TTJ 861 (Del), it is not obliged to deducts TDS. The relevant para of reply dt. 11.03.2013 and 22.03.2013 are reproduced as under: Relpy dated 11.3.2013 (filed on 22.03.2013) We have been show-caused as to why disallowance be not be made in respect of transmission and uplinking charges for the non-deduction of TDS u/s 40(1)(ia) paid to Intelsat? Please note that we have already given the details of transmission and uplinking charges to your honour vide our submission dated 11th March'2013. We reiterate that the provisions of TDS/withholding taxes were fully complied with. The payments were made after obtaining the requisite certificates from the Chartered Accountant as defined in the explanation to section 288B of the Income Tax Act'1961. Copies of Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, 1961, there is no change in definition of the tern 'Royalty" under the DTAA between the India - USA. Therefore, even today the payments in question could not be taxed as "Royalty" in the hands of recipient in view of the favourable position on this issue in relevant DTAA. These payments were made after obtaining the requisite certificates from the Chartered Accountant (CA) who certified that the above sums were not chargeable to tax in India, as it constituted business income under Article 7 of the DTAA and in the absence of Permanent Establishment ('PE'), same could not be liable to tax in India. Intelsat Corporation is a non-resident company incorporated under the laws of USA and is a tax resident of USA and, therefore, the provisions of DTAA entered between India and USA are applicable on Intelsat which are more beneficial to Intelsat. For the year in question, the revenue of transmission and up-linking facilities in the hands of Intelsat Corporation were already held not taxable by the Honble Delhi High Court vide order dated 28/9/2012. The issue whether the recipient of such charges is liable to tax in India is also settled by the Jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act could not be invoked in view of the decision in the case of Merilyn Shipping & Transports (supra) as no expenses remained as payable as on March 31, 2009. Thus, in alternate on this account also no addition is warranted. The submission of assessee was duly considered and are not acceptable. The payments made under the head Transmission and uplinking charges are covered under the definition of royalty as define in section 9 of the I. T. Act. The provisions of the section 9 which defines the term royalty are reproduced as under: Section 9 Income deemed to accrue or arise in India. (1) The following incomes shall be deemed to accrue or arise in India.... (vi) income by way of royalty payable by- (a) The Government; or (b) A person who is a resident, except where the royalty is payable in respect of any right,property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or.... (c) Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition of royalty through amendment in Finance Act,2012. In the case of PANM International system the issue examined by the Honble ITAT was regarding making technical knowledge available for the TV Channels. Where in the case under consideration the uplinking and transmission charges are being taken as royalty as defined u/s 9(1)(Vi). The above definition clearly indicates that transmission and uplinking charges are covered under the definition or royalty (process) and it has been categorically introduce by the finance 2012 that process includes and shall be deemed to have always included transmission by satellite (including up-linking , amplification, conversion for down-linkiong of any signal). Since the transmission and uplinking charges are covered under the definition of royalty as define under the provision of section 9 therefore any payment made in respect of royalty to a person who is not resident in India , will also be a income deemed or accrue or arising in India. As the expense of transmission and uplinking charges of Rs. 7,81,23,855/- to M/s Intelsat corporation is a deemed income which has arisen in India therefore, the assesse was liable to deduct TDS on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the hon'ble Supreme Court against the decision of Delhi High Court cannot be a reason for sustaining the disallowance. In view of this we do not find any infirmity in the direction of the ld DRP in directing the ld Assessing Officer to delete the disallowance transmission and up linking charges paid to Intelsat Corporation USA of Rs. 78123855/- In the result the ground No. 2 of the appeal of the Revenue is dismissed. 61. Ground No. 3 of the appeal of the Revenue is against direction of the ld DRP to delete the disallowance of Rs. 8245612/- on account of software expenses. During the year the assessee has incurred expenditure of Rs. 32435619/- on software expenses and claimed the same as revenue expenditure. The ld Assessing Officer was of the view that it is capital in nature and therefore depreciation @60% thereon is allowable and not the whole expenditure. After considering the submission of the assessee ld Assessing Officer held that computer software expenses to the extent of Rs. 20614030/- shown by the assessee is disallowable as it is capital expenditure. Therefore he allow depreciation @60% on Rs. 20614030/- amounting to Rs. 12368618/- and thus disallowed a sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentions. The assessee has been allowed the identical claim in earlier years by the ldCIT(A) and based on that decision the ld DRP was also of the view that the above expenditure incurred by the assessee is revenue in nature. The ld DR could not controvert that why the order of the ld DRP is erroneous. In view of this we do not find any infirmity in the direction issued by the ldDRP. In the result we confirm the direction of the DRP. In view of this ground No. 3 of the appeal of the revenue is dismissed. 64. In the result ITA No. 2658/Del/2014 filed by the Revenue is dismissed. CO No. 233/Del/2014 in ITA No 2658/Del/2014 ( By Assessee) 65. The ground No. 1 of the cross objection filed by the assessee the assessee has stated that the appeal filed by the assessee is barred by limitation and therefore could not be entertained and liable to be dismissed. However, during the course of hearing no arguments were advanced by the ld AR to show that the appeal of the Revenue is barred by limitation. In view of absence of any argument on the same we dismiss ground No. 1 of the CO of the assessee. 66. Ground No. 2, 3 and 4 of the CO of the assessee are against ground No. 1 to 3 of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld Assessing Officer to deal it in accordance with the law. 70. In the result cross objection No. 5 is allowed with above direction. 71. Now we come to the prayer of the assessee for the grant of permission to raise additional cross objection as under:- 1. The hearing in the aforesaid cross-objection No. 233/del/2014 filed by the assessee- appellant is fixed for hearing on 30th July 2015. Along with the aforesaid cross-objection seven more connected matters have been fixed. In respect of all the eight matters, the assessee has filed six paper books as well as its detailed written submissions filed before the Honble separately in order to expedite hearing in appeals. 2. Out of the eight matters as aforesaid, four of the matters i.e. two appeals,(one by the assessee ITA No. 1212/Del/2014 and another by the revenue ITA No. 2658/D/2014 and two cross objections, (one by the assessee Cross Objection No. 233/D/2014 and another by the revenue (Cross Objection No. 313/D/2014 pertains to the assessment year 2009-2010) In respect of the cross - objection No. 233/del/2014 the assessee cross -objector prays that, it be kindly permitted to raise following additional cross - objection which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 144C (13) of the Income-tax Act, 1961 (Act) and the assessment framed is apparently without jurisdiction as well as barred by limitation. Cross objection No. 7:- That the various findings recorded by the Ld. AO/Ld. DRP in the impugned orders are highly perverse and have been recorded with preconceived notions and without considering the submissions/evidences/material produced on record and hence, such findings are vitiated and deserve to be rejected and the additions so made in the impugned assessment order deserve to be deleted. Cross objection No. 8:- That the Ld. AO/Ld. DRP has grossly erred in law and on facts of the instant case in making an addition of Rs. 642,54,22,000/- (as sum equivalent to $150 Million) by invoking section 69A of the Act purely on surmises, conjectures and suspicion, failing to appreciate that under section 69A of the Act, the burden lay upon him to establish that, Appellant had made an investment of which it is an owner and has not been recorded by it in its books of accounts. 1.4 That the Ld. AO/Ld.DRP has grossly erred in law and on facts of the instant case in making an addition of the aforesaid sum of Rs. 642,54,22,000/- by invoking secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions for taxing any new source of income which is not emanating from the impugned draft assessment order. Cross objection No. 11:- That the Ld. DRP has grossly erred in law and on facts of the case in directing the Ld. AO to record his reasons before invoking Rule 8D of the Income Tax Rules (Rules), 1962, without appreciating that the provisions of section 14A of the Act are not applicable to the facts of the instant case. 11.2 That the Ld. AO erred in making an addition of Rs. 78,40,990 by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules by rejecting the claim of the Appellant that it has not incurred any expenditure in respect of the investments from which the earnings are exempt under the Act. Cross objection No. 12:- That on facts of the case and in law, the Ld. TPO/AO has erred in not discharging their statutory onus to establish that any of the conditions specified in clause (a) to (d) of Section 92C (3) of the Act have been satisfied before disregarding the arm's length price determined by the Appellant and proceeding to determine the arm's length price themselves. Cross objection No. 13:- That Ld. AO erred in enhancing the ALP by Rs. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh issues which would warrant any investigation of any fresh fact and that it had filed an appeal before the expiry of period of limitation and thus here can be no justifiable basis to contend that, a right had vested in the revenue in respect of such additions as the assessee had not filed an appeal within the statutory period of limitation." 72. The ld AR vehemently submitted that assessee has out of the sheer apprehension has raised this additional grounds of cross objections because of the reason that revenue is contending that the appeal filed by the assessee is not maintainable as the assessment has been framed u/s 144 of the Act. Though the assessee seriously disputed it and maintains that contention of the Revenue is incorrect but still out of abundant caution has raised additional grounds of cross objection in this appeal. It was further submitted that it could not be raised earlier as they were already raised in the appeal of the assessee in ITA No. 1212/Del/2014 and the contention of the revenue about the non-maintainability of the appeal of the assessee has arisen during the course of hearing of this appeal. He otherwise submitted that all the grounds raised by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarifying that the order is without jurisdiction and barred by limitation has already been considered by us while deciding the appeal of the assessee. In no uncertain terms we have held that ld Assessing Officer is correct in passing order u/s 144 of the Act after invoking provisions of section 145(3) coupled with noncompliance by the assessee to various notices issued u/s 142(1) of the Act. In view of this ground Nos 6 and 7 of the CO are dismissed. 76. Now we come to the ground No. 8 of the cross objection wherein the assessee challenges an addition of Rs. 642,54,22,000/- which is equivalent 150 million US$ made by the ld AO invoking the provisions of section 69A of the Income Tax Act. The main issue with respect to the addition is that assessee has a subsidiary namely NDTV Networks International Holdings BV (Investee Company) ( herein after referred to as 'NNIH') formed in Netherland on 10.04.2008 has received a sum of Rs. 642,54,22,000/- on account of subscription of its shares by one company namely M/s. Universal Studios International BV (Investor Company)( hereinafter referred to as 'USBV") which was incorporated with limited liability having its corporate seat in Amsterda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation Wing of the Income Tax Department had also issued summons u/s 131 to the assessee to obtain information. During the course of the draft assessment proceedings, AO has issued enquiry letters calling for the details of the information about the assessee and Itssubsidiary companies. Assessee had filed additional evidence before the DRP. The same was sent to the AO for examination and report. DRP had also sent the material received from certain sources during the course of the DRP hearing to the AO for remand report. Complex structure of subsidiaries and transactions 5.1 The assessee is the parent company of its subsidiaries located in different parts of the world. The share holding pattern of the group entities relevant to the present proceedings was submitted by the assessee during the course of the hearing which is placed in the diagram below. Assessee holds 100% shares in NDTV Networks BV, Netherlands. Further, the step down subsidiary of NDTV Networks BV, Netherlands holds 68% of shares of NNIH Netherlands. The next step down subsidiary NDTV BV, Netherlands has 90% share holding from NNIH Netherlands and 10% share holding from NDTV India Ltd. (i.e. assessee). NDTV BV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision of sub-section 8 of Section 212 of the Companies Act, 1956. The AO has pointed out that even this order of the Ministry of Corporate Affairs was not fully complied with. The assessee is a listed company. The disclosure of accounts prescribed by Security and Exchange Board of India (SEBI) was not adhered to in spite of the fact that the assessee has committed so to do under listing agreement with Stock Exchange. The order of the Ministry of Corporate Affairs was issued on 03.07.2009 whereas the audited accounts of the assessee was finalised much before that. In any case, this order exempting the assessee was not retrospectively operative. Therefore, the lapses or omissions of not making full and true disclosure in the audited accounts of the assessee were not condoned by the exemption order of Ministry of Corporate Affairs. 5.4 The AO had asked for details about these transactions through her letters during the course of the assessment proceedings. The AO has mentioned that the requisite information was not produced before ADIT Investigation, Unit-ll(2), New Delhi nor produced before her during the course of assessment proceedings. Therefore, the AO has come to the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Universal Studios International BV. As per requirements of law and accounting standards discussed above, the said sum should have been disclosed by the assessee. Whereas, the assessee has not disclosed the true nature of transactions in its books of accounts /financial statements . Moreover, it was only on 30/3/2013 i.e at the fag end of the limitation period that the assessee stated that this amount was received by its subsidiary company on account of subscription to shares by a foreign company. It was done deliberately by the assessee so as to avoid further scrutiny regarding the identity and creditworthiness of the share subscriber and genuineness of the transactions. The genuineness of this transaction shown as receipt of share capital becomes all the more doubtful In view of the fact the assessee has itself admitted that no independent valuation report wasobtained for determining the value of shares of its subsidiary company and that the subscription price was anegotiated price arrived at between the parties. Subscription to the shores of the subsidiary company of the assessee without determining any valuation forthe same and receiving such funds by a foreign party raises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand of Universal Studios BVNetherland. By selling the shares in the very next year NBC Universal Inc. has booked a loss of Rs. 584.46 crores and assessee has introduced Rs. 642.54 crores. 11) As the assessee is the ultimate parent company having controlling stakes in all its subsidiaries, it is the assessee's dictates which mattered, this is also evidenced by the share subscription agreement dated 23.05.2008. 12) The AO in his remand report in Para 2.3.11.1 has concluded by stating that "This subscription of shares of the assessee's group company, having face value of Rs. 40-45 per share (equivalent to one $ in INR) by NBCU @ Rs. 7,015.05 per share and its subsequent sale back to the assessee's another group company @ Rs. 634.17 per share, is therefore a sham transaction and it is a fit case, which requires the lifting of the corporate veil." 13) The AO stated that the arrangement had neither commercial purpose nor any economic substance but was only for tax evasion. The AO concluded that it is sham, colourable or bogus transaction with the pretence of corporate and commercial trading. 5.8 Based on the above material, the AO concluded that the money so received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest stake in NNPLC for an amount of USD 150 million. Further, the notes to accounts which is part of the audited account of the assessee in Schedule 21B(3) clearly mentions about the transaction in the year 2009-10 about the buyback of Universal Studios International BV's 26% indirect holding in NDTV Network Pic for a consideration of Rs. 58.8 crores: Assessee retained majority stake in NDTV Networks Plc. 6) Notarized confirmation letter was filed before the DRP on 23.12.2013 wherein a confirmation letter of one Mr. IJ Broadband was filed about this transaction. 7) The negotiated price of shares was based on the future projections. The representative of the assessee explained that during the period when the transaction took place, the Indian economy was booming. The assessee, being in the creative field of television broadcasting, was in a position to 'sell the dream' to a prospective investor. However, 'the dream' went bust subsequently. Therefore, the investor sold back the investment to the assessee at a reduced price. This was a perfectly legal and normal investment from all angles. Investor takes huge risks and accordingly makes huge gains or huge loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2013) has the following on this issue : "In an increasingly interconnected world, national tax laws have not kept pace with global corporations, fluid capital, and the digital economy, leaving gaps that can be exploited by companies who avoid taxation in their home countries by pushing activities abroad to low or no tax jurisdictions. This undermines the fairness and integrity of tax systems. The project, quickly known as BEPS (Base Erosion and Profit Shifting) is looking at whether the current rules allow for the allocation of taxable profits to locations different from those where the actual business activity takes place and if not, what could be done to change this. At the request of G20 Finance Ministers, in July 2013 the OECD launched an Action PTan on Base Erosion and Profit Shifting (BEPS), identifying 15 specific actions needed in order to equip governments with the domestic and international instruments to address this challenge. The plan recognises the importance of addressing the borderless digital economy, and will develop a new set of standards to prevent double non-taxation. This will require closer international co-operation, greater transparency, data and repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same time, different businesses may assess such risk differently, and failing to take advantage of legal opportunities to reduce an enterprise's tax burden can put it at a competitive disadvantage. Similarly, corporations that operate only in domestic markets, including family-owned businesses or new innovative companies, have difficulty competing with MNEs that have the ability to shift their profits across borders to avoid or reduce tax. Fair competition is harmed by the distortions induced by BEPS." India is a signatory and part of G20 Project. 5.11 The above references are important and pertinent in this case. Two conglomerates are involved in this transaction. One is the assessee- NDTV India Ltd. and its subsidiaries. The second is GE Group of Companies. As is well known, NDTV has its operation mainly in India and the proposed venture of NDTV Labs etc. (please see the diagram above) were also located in India. It is not possible to fathom out the intention of the assessee or the businessrationale to float the companies in Netherlands to indulge in such complex and layered transactions. This is the precise kind of holding structures which are the subject matter of BEPS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout a foreign holding or operating company) of an equity interest in a foreign invested Indian company. However, taxation of such Holding Structures very often gives rise to issues such as double taxation, tax deferrals and tax avoidance. In this case, we are concerned with the concept of GAAR. In this case, we are not concerned with treatyshopping but with the anti-avoidance rules. The concept of GAAR is not new to India since India already has a judicial anti-avoidance rule, like some other jurisdictions. Lack of clarity and absenceof appropriate provisions in the statute and/or in the treaty regarding the circumstancesIn which judicial anti-avoidance rules would apply has generated litigation inIndia. HoldingStructures are recognized in corporate as well as tax laws. Special PurposeVehicles (SPVs) and Holding Companies have a place in legal structures in India, be it in company law, takeover code under SEBI or even under the income tax law. When it comes to taxation of a Holding Structure, at the threshold, the burden is on the Revenue to allege and establish abuse, in the sense of tax avoidance in the creation and/or use of such structure(s). In the application of a judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above) can be applied to this case. The AO has filed the remand report,the most relevant part of which is quoted below: "2.3.10.1 I have gone through the additional evidence filed by the assessee vide its applications dated 29.04.2013 and 24.10.2013. The assessee has filed in the following documents in the shape of additional evidence vide its letter dated 29.04.2013 :- (i) Copy of Share Subscription Agreement dated 23.05.2008 and Share Certificate. (ii) Copies of Annual Reports of NBCU for FYs 2008 to 2010 filed before Securities Exchange Commission, US. (iii) Copy of Annual Report of NDTVfor FY 2009-10. (iv) Copy of Annual Report ofGE. (v) Copy of Form 10K filed by the Comcast Corporation before US Securities and Exchange Commission. (vi) Copy of bank account of NNIH in ING Bank, Netherlands. (vii) Copy of Audited Accounts of NNIH. 2.3.10.2 Further, vide letter dated 24.10.2013, the assessee has filed copies of submissions claimed to have been filed during the assessment proceedings, copy of Ld. CIT(A)'s order for AY 2007-08 in the case and copies of some notices issued by the AO. 2.3.10.3 No confirmation from NBCU regarding the transaction has been filed at all. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the right to charge the desired share premium does not absolve the assessee, when it is established that there is no commercial purpose or economic substance to the transaction for NBCU. The explanation that NNPLC was already holding investments in running entertainment verticals is of no value, when it is observed that NNPLC was making losses and during the relevant year, NNPLC had made a loss of Rs. 8.34 crores app. and the book value of its share was in the negative. What economic substance or commercial purpose could be there for NBCU in subscribing shares of a company, whose shares have a face value of only Rs. 40-45 per share, which would result in acquiring 26% effective indirect stake in NNPLC, which is only an investment company, has no business of its own, having recently formed, does not have any proven performance record, whose shares have a negative book value and which was actually liquidated within 3 % years of the transaction, (the duration of time during which the Holding Structure exists- factor as in Vodafone case} Needless to say, any investment, not to say an investment of Rs. 642.54 crores, would be made only with a view to earn profits, because that is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is observed that the assessee was the ultimate parent company and the issue of shares and subsequent repurchase as above by its group companies was not without its directions. Rather, the assessee was itself a party to the agreement and thus, it was the assessee, which dictated terms as to the transaction. The position of the group company NNIH or NNPLC was no more than an agent of the assessee. Regarding the money amounting to Rs. 642.54 crores also, it was the assessee, which was in ultimate control of the money. As discussed above, the facts only necessitate lifting of corporate veil in the case, as the assessee cannot be permitted to hide behind the corporate veil in a case of the impugned colourable device engineered to result in tax evasion. 2.3.13 Reliance in this regard was also placed by the assessee on the following case laws :- (i) CIT vs Sofia Finance Ltd. 205ITR 98 (ii) CIT vs Divine Leasing & Finance Ltd. 207 ITR 38 (iii) CIT vs Allahabad Bank Ltd. 73 ITR 745 (iv) Green Infra Ltd. Vs ITOITA No. 7762/Mum/2012 2.3.13.1 The cited cases do not help the assessee, because these are all different on facts. In none of the cited cases, there is any finding of buybac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition u/s 69A is correctly made by the AO in the draft assessment order. The condition for applicability of section 69A is not that the money should be in actual possession or control of the assessee. Rather, the condition is that the assessee should be the owner of the money, which is fulfilled in the present case. 2.1.16.2 The second condition of section 69A is that the money is not recorded in the books of accounts of the assessee. In the present case, it is undisputed that the money is not recorded in the assessee's account books. 2.1.16.3 The third condition is that the explanation offered by the assessee about the nature and source of money is not satisfactory. As elaborately discussed in the above paras of this report, the explanation given by the assessee about the nature and source of this money is neither satisfactory nor tenable. 2.3.18 Conclusion 2.3.17.1 In view of the above facts and circumstances of the case, involving the round tripping involving such huge variations in the rates without any basis or valuation, the transaction lacks economic substance and commercial purpose and necessitates the piercing of corporate veil. It is therefore submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred transaction, NDTV was having 56.80% stake in NNPLC. As such, it was having the rights of participation, management and control in the NNPLC to that extent, which was the property of NDTV and was also a capital asset of NDTV within the meaning of section 2(14) of the Act. Vide agreement dated 23.05.2008, this capital asset owned by NDTV was transferred to NBC and USBV, because by disposing of 26% equity in NNPLC, the stated stake, and consequently, the corresponding rights of participation, management and control owned by NDTV in NNPLC are extinguished to that extent. As such, the gains rising to NDTV as a result of this transfer of capital asset were chargeable to tax under section 45 of the Act. 2.3.18.7 As such, vide letter dated 11.11.2013, the assessee was asked to explain the issue. In response, vide reply dated 26.11.2013, the assessee contended that it was a case of fresh issue of shares and there was no transfer of property within the meaning of section 2(47) of the Act. It was further contended that mere transfer will not trigger capital gains tax unless it results in accrual of consideration. However, it is observed that as explained above, the transaction has resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in UK, was a new entrant without any performance record, was a loss making company having incurred loss of about Rs. 8.34 crores during the year, had invested in loss making companies and had its share's face value of Rs. 40-45 per share and book value in the negative. The raising of USD 100 million was possible solely because the assessee company NDTV had given an undertaking to provide a corporate guarantee for and on behalf of NNPLC, as and when required, in accordance with the terms of the Contracts and the Supplemental Trust Deed to be executed by the Company. 2008-09 26% of its stake was transferred to NBCU for Rs. 642.54 crores by way of issue of subscription equity of parent company NNIH. Again, NNPLC had only a meager capital of Rs. 40 lacs and did not have any business activities, any fixed assets, any place of business except a postal address in UK, was a new entrant without any performance record, was a loss making company having incurred loss of about Rs. 8.34 crores during the year, had invested in loss'making companies and had its share's face value of Rs. 40- 45 per share and book value in the negative. Looking at the facts objectively, no prudent i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to how NDTV / NNPLCdischarged its liability towards the principal andinterest payable to the investors on the said repurchase. {the generation of taxable revenues in India - factor as in Vodafone case} 2.1.19 From the above, the inevitable conclusion is that NNPLC was a Special Purpose Vehicle (SPV) created by NDTV, which acted as agent of NDTV for the purposes of NDTV and was liquidated as soon as it had outlived the purpose of its creation,{the continuity of business on such exit- factor as in Vodafone case} 2.1.20 In the case of Adams vs Cape Industries Pic [(1990) 2 WLR 6578], it was held that one of the three circumstances in which the corporate veil may be lifted would be in a situation, where the subsidiary is an agent of the company. In the present case, the situation is the same and the business affairs of the holding company NDTV and the subsidiary NNPLC are so intertwined that it is not only permissible but necessary to lift the corporate veil. The intertwining is evident from the fact that NNPLC carried out only two major transactions during its existence - the 1st transaction was to raise USD 100 million through Step Up Coupon Convertible B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above amount through the lengthy and circuitous transactions, the commercial substance/ economic rationale for such transaction has not been satisfactorily explained. Assessee's theory of having sold a "Dream" to the investor has not been substantiated by any credible evidence as no details have been filed whatsoever for the so called business projections and the basis for computation of the sale price of the share at the astronomical price of Rs. 7,015/- which is 159 times of its face value of Rs. 45/-. Needless to mention that the subject company whose shares were sold was incurring huge losses and there was hardly any worthwhile business to justify the above sale price. Interestingly, the assessee/ subsidiaries have again repurchased the same share in the very next financial year at the price of Rs. 634.17 per share totallingRs. 58 crores. Here also no details/ justification has been given by the assessee as to how the above buy back price was fixed by the assessee when the so called "Dream" went bust, as being claimed by assessee. What was the justification for the assessee to buy back the shares of nearly defunct and own subsidiary company at a value which was more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 and the summary of the oral argument of the AO dated 26.12.2013 are reproduced below: Extract of remand report dated 11.12.2013 "2.4 Tax implication of unsecured loans amounting to Rs. 365.25 crores received by NDTV through its subsidiary NNPLC 2.4.1 The Hon'ble DRP vide letter no. 262 dated 28.10.2013 had directed further enquiries to be made regarding the unsecured loans amounting to Rs. 365.25 crores allegedly received by NDTV through its subsidiary NDTV Network Pic ("NNPLC") and the tax implication thereof. 2.4.2 Vide this office's letter no. 1705 dated 11.11.2013, the assessee was asked to explain on the issue as under :- "2.3 During the year, the assessee company, through its guarantees, raised an amount of Rs. 365,25,00,000/- as unsecured loans through its subsidiary NNPLC. Please furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions " 2.4.3 In response, vide letter dated 26.11.2013, the assessee contended that during the year under consideration, there was an increase of Rs. 110.50 crores in the amount of unsecured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -09 has been perused and it is found that there are no such documents on record. Accordingly, you are given an opportunity to now file the following documents, which are stated to have been filed by you earlier :- (i) Complete list of the subscribers of bonds, subscription agreement and other relevant details claimed to have been filed during the course of the assessment proceedings for AY 2008-09. (ii) Complete information with respect to raising of bonds claimed to have been filed before Investigation Officer and DIT (Inti) during the course of assessment proceedings. 2.2.4 In this regard, please also refer to letter filed by you on 29.11.2013, wherein you have stated that the increase of Rs. 110.50 crores in the Step Up Coupon Bonds is merely the reinstatement of foreign currency liability. In this regard, please furnish the relevant copies of accounts along with complete book entries made in Journal, Ledger, etc. in respect of the said increase reflected in the accounts. Also furnish copies of accounts regarding interest paid to the said investors during the year. 2.2.5 Regarding the balance addition of Rs. 254.75 crores in the unsecured loans, you have claimed that the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same. The assessee has further submitted as below: * The appellant was not able to produce the above documents since the issue came up for the first time before the DRP and the assessee as unable to submit the same due to paucity of time. * The loan agreement was not specifically asked for by the Ld. AO. * The evidence submitted in this submission is correct and very much relevant for deciding the appeal of the appellant. * It is requested to your good self that the evidences be admitted and be considered for deciding the matter. Your goodself may exercise the powers conferred on yourself by the law, which are very much required to be exercised in the light of facts and circumstances of the case. 5.21. The additional evidence in the form of copy of the purported loan agreement (supri) has been admitted in the interest of natural justice and was handed over to the AO for his response. The response is received, the extract of which is reproduced below: Extract of response of the AO dated 26.12.2013 "2.2 Regarding enhancement of liability on account of Step Up Coupon Convertible Bonds by Rs. 110.50 crores 2.2.1 As discussed above, USD 100 million were reflected to have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy translation or otherwise must necessarily meet the same fate. Hence, the amount of Rs. 110.50 crores, being enhancement during the year, in the original liability from unproved source, is proposed to be added to the assessee's taxable income forAY 2009-10. 2.3 Regarding introduction of unsecured loans amounting to Rs. 254.75 crores from NDTV BV in the books ofNNPLC 2.3.1 During the year under consideration, NDTV through NNPLC has raised unsecured loan amounting to Rs. 254.75 crores as mentioned in the relevant Schedule to Balance Sheet as on 31.03.2009. When asked vide this office's letter no. 1705 dated 11.11.2013, the assessee replied that the unsecured loan amounting to Rs. 254.75 crores hadbeen raised from NNPLC's intermediate holding company NDTV Networks BV and the relevant details had been filed during the course of assessment proceedings forAY2008-09. 2.3.2 Vide letter dated 05.12.2013, it was intimated to the assessee that on perusal of assessment record for AY 2008-09, no such documents were found. Accordingly, the assessee was given an opportunity to now file these documents, which were being claimed to have been filed by it earlier. The assessee was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness of the transaction. Even the copies of documents, wherever furnished by the assessee, are photocopies, not subject to any verification or enquiries. It is pertinent to place on record that any specific issues can be proved only by specific evidence and not on the strength of claimed reputation or volume of business of the lender. Hence, the assessee has not been able to prove the source of addition in unsecured loans and the same is proposed to be added to the assessee's taxable income." 5.22. DRP has carefully considered this issue. Out of Rs. 365.25 crores representing unsecured loan, under reference, an amount of Rs. 110.5 crores is due to the restatement of the original amount pertaining to a transaction happened in the FY 2007-08 which was the subject matter of assessment for the A Y 2008-09. It appears from the report that there was no disallowance made on the amount in the first place in the AY 2008-09. Therefore, to disallow Rs. 110.5 crores on account of reinstatement of the amount is not called for as rightly mentioned by the AO in his remand report dated 11.12.2013. (quoted in the earlier paragraph no. 5.18 on Page no. 22 onwards) 5.23. The AO has examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare capital of NDTV PLC. By this agreement it was agreed that the Universal Studios International BV which subscribes for share in the NDTV Network International Holding BV pursuant to the further shares subscription agreement of the even date. He further referred to share subscription agreement dated 23.05.2008 which his placed at page No. 107 to 222 of the paper book. The above agreement was an agreement dated 23.05.2008 entered into between NDTV Networks International Holdings BV, NDTV Networks BV, Universal Studios International BV, NBC Universal Inc. and New Delhi Television Ltd. According to that agreement it was mentioned in Clause NO. 4 that subscription share consideration of US$ 150 million is payable to NDTV Networks International Holdings BV by the subscriber i.e. Universal Studios International BV. He therefore, submitted that subsidiary of the assessee has received a subscription of the share capital through another company and therefore, such sum cannot be the income of the assessee holding company. He further referred to page no. 651 of the paper book which is the statement of account of the ING Bank to show that a sum of US$ 150 million has been transferred in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly off loaded in November 2009 at a loss of US$118 million. He further referred to agreement dated 14.10.2009 which is agreement for sale and purchase of shares to NDTV BV between Universal Studios International BV as a seller and NDTV Network BV as the purchaser where other parties are also such as NBC Universal Inc., NDTV BV, NDTV Network PLC and New Delhi Television Ltd (assessee). According to that agreement for a consideration of US$12527250/- the shares of the NDTV BV were sold and for US$12472750/- were also paid by the buyer in respect of receivables. Accordingly, it was stated that subsequent repurchase of shares were agreed by the parties as per discussion between them. It was further submitted that above transaction is also supported by email dated 02.10.2009 wherein the mail is addressed by Mr. Smith Pete, President of NBCEL Inc. to Shri KVL Narayan Rao, Vikram Chandra and one Mr. IT Vajpayee wherein, there was an acceptance offer made by the seller at US$ 25 million to exist from the business of unsuccessful partnership between the NDTV Group and NBC Universal. He further stated that this offer price was quoted by the seller and therefore, it is agreed between the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NBCU will be granted an option to acquire an additional effective indirect stake up to 24% in NNPLC through NNIH in the third year of the joint venture at the then fair market value of the shares, subject to receipt of all necessary consents and approvals. Therefore, he submitted that in the annual report the complete transaction is disclosed. 82. He further stated that transaction is supported by shareholders agreement and share subscription agreement both dated 23rd May 2008 and also the share purchase agreement for repurchase of the shares dated 14/10/2009. He further submitted that investor is a group of repute whose annual accounts are also placed before the Assessing Officer. Therefore, it is proved that investor is not a sham company, Paper Company or a bogus or shell company as it is in business and shareholder of that company is Universal Studios, which is an internationally renowned name. 83. He further submitted that as the sum is not found credited in the books of account of the assessee hence, there is no application of section 68 of the Act. Further, he also said that there is no application of section 69A of the Income Tax Act, 1961 as the assessee is not found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the facts that confirmation from investor company namely M/s Universal Studios International BV had not been filed by the appellant company in his comments before DRP (see Para 2.3 to 10.3 o f DRP order (page 136 of Appeal Set). 26.4 Lastly it is submitted that so long the assessee has unable to identify the shareholder, who has also confirmed that he has made investment and is one of the largest US company, the . The allegation of the A.O. is wholly arbitrary. 26.5 In any case and without prejudice it is submitted that the provisions of section 69A of the Act has no application as the same is duly recorded in the books of the investee company when the investment was made and thus on neither of the grounds, the addition is tenable. 26.6 In light of the above back ground it is submitted that from the aforesaid it would be seen that the admitted facts are: i) That the assessee M/s NDTV Ltd. has twenty one subsidiary companies. The details thereof are as under: Sr. No. Particulars i) Subsidiary companies within India ii) Subsidiary companies outside India TotalThe details of subsidiary companies (outside and within India) are en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 (pages 1-104 of Paper Book) ii) Share subscription agreement dated 23.05.2008 (pages 107222 of Paper Book) iii) Annual report of calendar year 2008, 2009 and 2010 of NBCU i.e. the allottee of shares issued by NNIH (NDTV Networks International Holding BV) (pages 223-262 of Paper Book) iv) Annual report of NDTV for financial year 2009-10 (pages 263278 of Paper Book) v) Annual report of GE (pages 379-502 of Paper Book) vi) Form 10K of S.E. Act of US (pages 503-650 of Paper Book) vii) Bank account No. 02.01.28.342 of NDTV, Networks International Holdings BV. (page 651 of Paper Book) viii) Annual accounts of NDTV Networks International Holdings BV (pages 652-665) ix) Confirmation letter from Universal Studios International BV dated 1.8.2013 (pages 668-669 of Paper Book) x) Share issued deed dated 25.3.2008 (pages 670-673 of Paper Book) xi) Bank certificate from BNP Paribus evidencing payment of 150 million USD (pages 674-675 at pages 680 of Paper Book) xii) Annual report of Universal Studios BV (pages 676-719 of Paper Book) xiii) Apostilled copy of confirmation from Universal Studios International BV (pages 722-725 of Paper Book) xiv) Agreement dated 14.10.2009 (pages 123 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Holdings BV was M/s NDTV Networks BV, who had acquired all the shares of in M/s NDTV Networks International Holdings BV. It is submitted that M/s NDTV Networks BV, is a company incorporated on 9.1.2008 in Netherland. It is submitted that, it is also on record that the said company is an investment company. It is also undisputed fact that there has been no finding or adverse observation made by the assessing authority that either under the Income Tax Act or any other Act that such company was dummy or non-existing company. In view of the aforesaid it is submitted the observation/ finding by the authorities in their respective orders i.e. directions of the DRP and the assessment order impugned before the Bench that the transaction was sham, is based on speculation, surmises and conjectures. 27.2 It is submitted that it is well accepted that a subsidiary and its holding company are distinct and separate entities. They are subject to income tax on the profits derived by them on standalone basis, irrespective of their actual independence and regardless of whether the profits are reserved and distributed to shareholders/participants. It is well settled law that holding and its subsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 (MP) CIT vs. Peoples General Hospital Ltd. Limited, Shariah is a bogus company or a non-existent the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the established. In the present case, in the light of the judgment of Lovely Exports (P.) Ltd.'s (supra) we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing & Finance Ltd.'s case (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiding the true nature of the transaction. In other words, in order to lift corporate veil, it needs to be establish beyond doubt that the transaction in question is taxable in the charging section of the Income Tax Act and the taxes were avoided by the group by interposing the subsidiaries. It is further submitted that the assumption and action of the Ld. AO/DRP of lifting the corporate veil in respect of the foreign subsidiaries which are incorporated and governed by the laws of their respective countries and had treaty protection is complete defiance of the decision in the case of UOI vs. Azadi Bachao Andolan reported in 263 ITR 706 wherein it has been held as under: "The decision of the Chancery Division in F.G. Films Ltd., In re 53 (1) WLR 483 was pressed into service as an example of the mask of corporate entity being lifted and account be taken of what lies behind in order to prevent 'fraud'. This decision only emphasises the doctrine of piercing the veil of incorporation. There is no doubt that, where necessary, the Courts are empowered to lift the veil of incorporation while applying the domestic law. In the situation where the terms of the DTAC have been made applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax avoidance. It is submitted that the fact that shares had been acquired by Universal Studios International BV when it paid consideration cannot be disputed. It is submitted that Universal Studios International BV has not merely confirmed the investment but has also established source of funding of investment thus whether such shares were acquired of assessee company or of subsidiary cannot be any ground to enable the revenue to lift the corporate veil. 27.12 The only basis to allege that the transaction is 'sham' is issuance of share at astronomical price and repurchase at a lower rate. However, in the process, the revenue is overlooking the, same could make no difference. To clarify the same, it is submitted that, had the shares been issued by the appellant company instead of subsidiary, could it have made any difference in law, since is either of the two cases, there was no tax implication much less avoidance. Thus, the basic threshold condition being non existing the effort of the authorities to lift the veil is totally beyond jurisdiction. 27.13 It further observed that, while doing so, the revenue/courts should keep in mind the following factors: * The concept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en it had issued 26% even on that basis, it would be USD 105 million as against investment of USD 150 million. Further, again convertible bonds were issued for conversion into equity shares after 5 years, when 20% of the holding was to the allotted to the bond holder namely. These bonds were issued for 100 million, and thus transaction was a genuine transaction. In any case, it is a commercial decision and the same has no consequence. Further, it is submitted that, when the shareholder who had acquired the share felt that, it is commercially unviable for it to remain invested it sold the same and as such so far raising of capital is concerned, the same is an irrelevant consideration. 28 Without prejudice to the allegation that M/s NDTV Networks International Holdings BV being a group company came into existence for a short period and did not carry on any business as alleged, the same by itself is not any ground or, basis to hold that the transaction of the subscription of shares by M/s Universal Studios International BV, is a sham transaction. It is submitted from the submissions made above, it is apparent that M/s Universal Studios International BV, the shareholder was a subsidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the transaction to be sham, unless and until, the same is demonstrated by the tangible evidence. It is the alleger who has to establish the fact by leading positive evidence in support of his allegation that, apparent is real unless proved to be contrary. In the instant case, apparent is that there is a company incorporated under the laws of Netherlands and that it had made investment in assessee's subsidiary and had made the payment through its accounts which is duly reflected in its final account and that it has been further confirmed by it and also its holding company as also reflected such investment in their final balance sheet. 28.3 It is submitted that the charging of premium on fresh issue of shares is based on the business potential of the group which mainly consists of the entertainment vertical of the business. It is settled in law that the share premium received on the issue of shares has to be included in the paid up capital irrespective of whether the share premium has been maintained in a separate account apart from the reserve as held in the case of the Hon'ble Supreme Court in the case of CIT Vs Allahabad Bank Ltd. reported in 73 ITR 745. Drawing support fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the share is totally irrelevant consideration and cannot be made any ground whatsoever to hold that, it is an unaccounted income of the assessee so as to invoke section 69A of the Act, which had absolutely no application. 28.7 On the facts of the present case, it is an admitted and undisputed fact that the transaction in question is subscription of the share capital in a foreign subsidiary of the assesee company by the Investor which in the normal charging provisions of the Act is not chargeable to tax. Thus, there is no basis to lift the corporate veil. It is further submitted that the addition in the present case was sustained by invoking the provisions of section 68 and 69A of the Act which in itself are complete and deeming provisions, therefore, the ingredients of said sections need to be construed strictly, and there is no scope to bring the fiction and assumption of lifting a corporate veil to hold the holding company liable to be taxed in that sections. In other words and without admitting, it is submitted that no addition could be made in the hands of assessee company being a holding company of the company whose share capital was introduced under section 68 or 69A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough lengthy and circuitous transactions and commercial substance/economic rationale for which have not been satisfactorily explained lacks credence or any merit. 29.4 It is submitted that there is no basis to allege that explanation was either lengthy or transactions were circuitous. It is submitted that in what manner, the explanation was either lengthy or the transactions was circuitous lies only in one's imagination. No basis or any material has been led by the learned DRP to conclude and hold that explanation of the assessee in respect of the share capital received by its subsidiary from a global company was lengthy and furthermore, such a transaction was circuitous transaction. In such circumstances, the opinion of the learned DRP is based on hypothetical assumptions, theoretical considerations and imaginative suppositions and hence in the respectful submission of the appellant, absolutely and entirely arbitrary, unjustified and untenable. 29.5 It is further submitted that the observation of the learned DRP that appellant has not been able to satisfactorily explain the commercial substance and rational for such transactions, is also misconceived, misplaced and overlooks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been allotted to an independent investor for a sum of 20 million US Dollar giving an enterprise value of 400 million US Dollar. Later, preference shares had also been allotted for 100 million US Dollar by NDTV Networks is not a valid basis to make an addition 30 It is submitted that the conclusion that transaction lacks economic substance and commercial purpose is a matter of mere figment of imagination as the learned Assessing Officer of the assessee company cannot hold that it lacks economic substance or commercial purpose without even calling upon the investor, who had made investment to hold so. 30.1 It is submitted that while subscribing to the shares in the subsidiary, the investor/capital contributor namely (USBV) had agreed to the business plan which is the part of the shareholder agreement dated May 23, 2008. The amounts so received on subscription of capital were utilized in accordance with said plan, and there is no dispute on the same and had been confirmed by the investor in writing. Therefore, the allegation that the amount so received consists of premium would be misconceived and devoid of any merit and is merely based on suspicion and conjectures which could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... den assets in the form of patents, copy rights, intellectual property rights or even investments etc belonging to the company based on which the assessee would be likely to substantially enhance its profits, which may have a bearing on the premium to be charged on allotment of the fresh shares In the above facts, the Honble Tribunal has held as under: - "....No doubt a non-est company or a zero balance company asking for a share premium of Rs. 490/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. Details of subscribers were before the Revenue authorities ....................... " Reliance is also placed on the judgment of Jurisdictional High Court in case of CIT vs. Empire Buildtech (P) Ltd. reported in 43 taxmann.com 269 has held as under: "3. The facts in brief are that the assessee filed its income tax return for the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares subscribed by the investors, the amounts paid by them, the individuals who paid the amount towards such capital and the gross income reported by each of such investors to the Revenue. A look at that chart - the contents of which have nowhere been disputed - would show that the investors had by and large reported amounts far less as compared to the sums invested by them, towards share capital. Furthermore, the AO had during the course of the assessment issued notices under Section 133 (6) to the investors - 28 of them responded; 2 did not receive the notice and 9 of them received the notices and responded, but did not submit any confirmation. While entertaining this appeal on 12.11.2013, the Court had issued notice restricting to the addition of Rs. 31,94,000/-, i.e., so far as it pertained to 11 subscribers/investors whose particulars could not be verified and who did not respond to the notices issued by the AO. 8. Having regard to the circumstances, particularly, the fact that these investors not only did not submit any confirmation and had concededly reported far less income than the amounts invested, this Court is of the opinion that the assessee could not under the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable to the Applicant Company as NDTV is a company in which public is substantially interested. Therefore, no adverse inference could have been drawn in the facts of the present case in respect of charging premium. It is also important to note that the said provision is not applicable in the case of the investor being a foreign company investing in share capital of an Indian company at a premium. Further, it is a fact that both investor and investee companies are non-resident companiesand the provisions of the domestic law would have no application whatsoever. 30.6 Secondly, both AO/DRP had alleged that subsequently in a short period of time said share capital was repurchased at a much lesser price which resulted into capital loss in the hands of the investor (USBV) which rendered entire transaction sham as it had no commercial and economic substance. It is submitted that the said allegation is completely misconceived and devoid of any merits on account of the following reasons: The subsequent event of repurchase would not be material to determine the nature of the original transaction specially when the provisions of section 68 and 69A of the Act were invoked. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 85.68% of the issued and paid up equity share capital of NDTV Imagine on the Closing date resulting in a decrease of NDTV networks Plc's stake in NDTV Imagine from 90.68% to 5% for a cash consideration aggregating to US$ 73.48 million. The transaction also involved a further infusion of a sum of US$ 50 million as equity capital in NDTV Imagine by TAPV, which has resulted in further dilution to 3.18%." 30.8 From the above, your Honours would appreciate that the total consideration of USD 12.5 million for re-purchase of the 26% stake is fair, reasonable and was negotiated by the parties on the basis of the commercial consideration and not with any ulterior motive or as a device to evade any tax liability. In addition to the above, the applicant has also submitted the copies of the mails wherein NBCU had shown it's desire to exit from the joint venture on the above stated consideration. Therefore, it is factually and legally incorrect to allege that the transactions of subscription of shares and subsequent repurchase were not genuine and had no commercial and economic substance. 30.9 In view of the above, it is submitted that the addition was merely based on surmises and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the entire income earned anywhere in India and in fact such is not a issue. The issue involved is limited and i.e. whether the amount received by way of share subscription by the assessee subsidiary in Netherland could be regarded as assessee's income u/s 69A of the Act, despite the fact as stated above. 32 It is submitted that, there can be no opinion other than what has been held by Apex Court in the case of CIT vs. Lovely Exports Pvt. Ltd. reported in 319 ITR 5 (St) that where an assessee identifies the shareholder he discharges his obligation. In this case no shares were issued by the assessee and shares issued by the assessee's subsidiary which were duly identified by the subsidiary to have been contributed by the shareholder, who not only existed but has substantial financial background. 33 In such circumstances, the submission of the appellant is that the following findings of the authorities: i) That "transaction" is sham; ii) That corporate veil is to be lifted; iii) That share capital received is assessee's own money; iv) That no investment has been made by the investor i.e. M/s Universal Studios International BV, is totally unte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nations could not be rejected by merely stating that evidences have no evidentiary value in light of the suspicious, imaginary and irrelevant grounds, especially when the evidences and explanations of the assessee shows and prove beyond doubt that the receipt in the hands of NNIH is not of a nature of an income. It is a settled principle in law that the Revenue could not -convert good proof' into -no proof' or otherwise act unreasonably and arbitrary which it seemed to have acted without commenting and stating the specific reasons and grounds that why such evidences have no evidentiary value. The Applicant fervently believes that the evidences so filed is good enough proof to support that the transaction is genuine and driven with objective of business needs, and there is no reason whatsoever to cast doubts on imaginary, vague and misconceived facts. 33.3 It is also submitted that under law the burden of proof is on Assessee to prove the genuineness of the transaction, however, the review of the judicial dicta on this issue reveals that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee, and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act that said money, bullion, jewellery or other valuable article is not recorded in the books of accounts would not be satisfied because of the 34.2 Be that it may so, the applicant submits that the provisions of section 69A of the Act could not be invoked in the present case in addition to what has already been submitted above. 34.3 It is further submitted and reiterated that the ingredients of section 69A of the Act are not present in the facts of the case and the addition is not legally sustainable on this ground in view of the submission made here- in-below: The Applicant submits that the deeming part of section 69A of the Act, dealing with unexplained money etc. comes into play only if the following two conditions are fulfilled: 1) The assessee is found to be owner of any money, bullion, jewellery or other valuable article; and 2) Such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by the assessee for any source of income. 34.4 The applicant most respectfully submits that both the ingredients i.e. the assessee is the owner of money and such money not been recorded in the books of the assessee are not fulfilled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his shareholding, which is immovable property with all the attributes thereof. ii) A company as a juristic person is distinct from its shareholders. It is the company which owns the property, not the shareholders. iii) The rights of shareholders are such as are delineated under the provisions of the Companies Act. A shareholder while having no rights of ownership in the assets of the company has a voice in administering the affairs of the company and would be entitled, as provided by the Articles of Association, to dividends, distribution out of the profits of the company. 34.9 The above principles find resonance in several other decisions including RC Cooper vs. Union of India reported in ((1970) 2 SCC 298 (the Bank nationalization case) where the Court reiterated the principle that a company registered under the Companies Act is a legal person, separate and distinct from its individual members; its property is not the property of the shareholders who have merely an interest in the company arising under the Articles of Association, measured by a sum of money for the purpose of liability and for sharing the profit; and that where companies are incorporated for a lawful purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee under section 69A of the Act. 34.14 The applicant most respectfully further submits that the Applicant had duly discharged its onus as required under the law. Further, it is well settled law that mere allegations that the transaction in question is sham on surmises and conjectures would be not be justified in the eyes of law. The Applicant had explained the transaction in question in a detailed manner and had also filed the confirmation letter of USBV as additional evidences which is already placed on record wherein the buyers identity, creditworthiness and source of making an investment is confirmed and authenticated and also corroborated by the Financial Statements of USB V and NBCU. 34.15 In light of the confirmation received from the party who had invested in NNIH, its identity and credit worthiness had been duly established. Accordingly, we submit that the assertions of the Ld. AO that the documents do not have any evidentiary value is not correct in law and is totally devoid of any merit as it is well settled law that mere suspicion on the transaction could not be a basis of making an addition. In support of the above, the applicant company placed its reliance in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious companies as under:- Calendar Year Investments (Millions USD) 2007 384 2008 902 Infact, even as a group of the shareholder (NBCU) the revenues from operations of past three calendar years are as under Calendar Year Revenue (In USD, in millions) 2008 16802 2009 15085 2010 16590 34.21 Thus, it is submitted with full conviction that the transaction is genuine and a bonafide transaction and had duly been recorded in the books of NNIH. Therefore, there is no question that the said money be treated as unexplained money in the hands of the applicant under section 69A of the Act. Even the Revenue had not brought any material on record which could displace or controvert the above submission/evidences of the assessee which is necessary and desirable in order to make an addition under section 68 or 69A of the Act. 34.22 It is submitted that, on the survey of the order of assessment which has resulted into a finding the said transaction pertaining to the receipt by the subsidiary which has been as sham, it is submitted that the same is based on complete conjectures and surmises without bringing any mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en undertaken not on papers but has also been implemented in letter and spirit too. Further it has to be established that the parties to the transactions had motives to avoid tax whereas in the instant case it has not been shown that either the assessee had any motive to reduce its tax liability nor has been shown the shareholder a totally unconnected company had in any manner reduced their tax liability. The burden to establish the transaction is from being on revenue, could not be stated to have been discharged without establishing that the funds by which the shares are subscribed come from the assessee. It is submitted that this in the absence of any material, the funds flowed from the assessee's subsidiary or from the assessee, such a finding that the transaction is sham is on a result of an arbitrary approach, and is based on mere hypothetical assumptions. 34.25 In response to the aforesaid suspicion of the learned A.O. the assessee vide its submissions dated 29.11.2013 (pages 1170-1183 of Paper Book) submitted that, the A.O. in the draft assessment order had proposed the addition by invoking section 69A of the Act and the assessee discharged its primary onus which lay upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and therefore, it cannot be said that the onus has been discharged by the assessee even in the context of section 68 or section 69A of the Act, as sought to be justified by the assessee in its letter dated 29.11.2013." 34.29 It is thus absolutely clear that, the learned A.O. had proceeded on an assumption that the assessee did not filed any confirmation from NBCU regarding the transaction. It is further be noted that, he himself admitted that, had it been a normal business transaction such confirmation would have been furnished and it was thereafter for him to have rebutted the said material in the shape of confirmation. It is submitted that, the assumption so made is thus by not only overlooking the aforesaid additional evidence but failing to discharge its burden in the face of documentary evidence furnished which in his opinion was highly relevant to establish the genuineness of transaction. The appellant had submitted that, the learned A.O. has proceeded to misconceived facts in making the aforesaid addition and holding the transaction to be sham. It is worthwhile to be stated here that the learned A.O. without any material assumes when he records in his order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has been brought on record by Shri S.K. Srivastava is even taken on record for purpose of determination of issued by Honble Tribunal but only with one prayer that the issue be examined dispassionately and, not be influenced by his inferences, as had been stated by him and noted by DRP, as its own findings. In other words, the submission is that such material, which is general to the issue, be examined dispassionately but not as Shri S. K. Srivastava, desired to do so 35 To highlight the aforesaid submission, the appellant seeks to refer straightway to page 125 of the Appeal Set where the learned Assessing Officer has made an attempt to justify his conclusion that transaction in sham by observing that no confirmation has been filed for the transaction at all. He further admits that had it been a normal business transaction then it would be necessary for the assessee to file confirmation from NBCU, which would be subject to verification by the AO, by calling upon the assessee to file an affidavit from NBCU or to produce the authorized representative of NBCU to confirm the assertions. It is submitted that the aforesaid finding is not only factually incorrect but is clear attemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a result of an arbitrary approach, and is based on mere hypothetical assumptions. 35.3 It is further submitted that the finding of the DRP is that the issue of shares and subscription made by the shareholder is a sham transaction. It is submitted that, merely because the DRP has concluded the transaction to be sham by itself is insufficient to hold the transaction which has in reality been undertaken to be a sham on the ground that the investor at the time of making subscription did not have any material to satisfy itself that the value of shares subscribed by it represented the value of shares or that subsequently after a period of about 18 months, said shares had to be transferred by the shareholder at a price which was far lower than the value at which it had subscribed the shares. It is submitted that a transaction can be held to be a sham transaction which was not intended to be operative, and was merely a cloak to conceal a different transaction. Reliance is placed on the following judicial pronouncements: i) 49 ITR 165 (SC) Kalwa Devadattam and Two Others vs. UOI ii) 149 TTJ 537 (Cal) ADIT vs Maersk Line UK Ltd iii) 356 ITR 25 (Kar) Bhoruka Engg. Industries Ltd. vs D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minster's case [1936] AC 1 (HL); [1935] 19 TC 490, 511): "I do not use the word device in any sinister sense: for it has to be recognised that the subject, whether poor and humble or wealthy and noble, has the legal right so to dispose of his capital and income as to attract upon himself the least amount of tax. The only function of a court of law is to determine the legal result of his dispositions so far as they affect tax." Lord Tomlin said: "There may, of course, be cases where documents are not bona fide nor intended to be acted upon, but are only used as a cloak to conceal a different transaction." In Snook v. London and West Riding Investments Ltd. [1967] 1 All ER 518 at 528 (CA) Lord Diplock L. J, explained the use of the word "sham" as a legal concept in the following words: "...it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly existed in earlier years and the extent of the assessee's business in the relevant accounting year. The initial burden of finding some material, however slight, to support a finding of concealed income, is on the Department. (ClT vs. K. Mahim Udma reported in 242 ITR 133 (Ker), Indian Gum Industries Ltd. vs. Asst. CIT (Civil Sales Tax Revisions No. 183/2003, 194/2003, 195/2003, 230/2003, 231/2003 dated 29thAugust, 2013) HC Rajasthan, Sheikh Baboo vs. Madanlal Jaiswal & Anr reported in (2013) CLT 13 (CN). In CIT versus Daulat Ram Rawat Mull reported in 87 ITR 349, the Supreme Court held that onus of proving what was apparent is not real is on the party who claims it to be so. There should be some direct nexus between the conclusions of fact arrived at by the authorities concerned and the primary facts upon which the conclusion is based. Use of extraneous or irrelevant material in arriving at the conclusion would vitiate the conclusion of fact, because it is difficult to predicate to what extent, the extraneous and irrelevant material has influenced the authority in arriving at the conclusion of fact. 35.7 It is well settled rule of law that the prudency and commercial decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are formed and when they are struck off/ merged/ liquidated. He specifically referred to the corporate structure of the assessee. He submitted that the assessee formed a 100% subsidiary in the name of NDTV Network BV, Netherland on 09.01.2008 and it went into liquidation on 25.03.2011. Another subsidiary company in the name of NDTV Network International Holding, Netherlands was formed on 10.04.2008, wherein, 68.6% holding was of NDTV Network BV and 31.4% holding was of Universal Studios International BV. This company was merged with another entity NDTV Network BV on 01.04.2009. In this company the amount of US$150 million (Rs.642 crores) were received for 31.4% stake. Further, on 28.12.2006 NDTV BV, Netherland was formed and subsequently, on 15.10.2010 it was merged with NDTV Network BV. The NDTV BV, Netherland was holding 92% of equity in NDTV Network PLc UK which was formed on 30.11.2006 and liquidated on 28.03.2011. This company was holding shares of various operating companies in India such as NDTV Labs, NDTV Imagine, NDTV Lifestyle, NDTV Convergence and NGEN and emerging markets BV. From the above facts, it was submitted that first subsidiary company was formed 09.01.2008 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of NDTV Networks International Holdings BV who is just holding 68% shares of that company. He referred to page No. 663 of the paper book of the assessee. He therefore submitted that immediately on receipt of the money of Rs. 642 crores byNDTV Networks International Holdings BV the money was siphoned out by way of dividend. He further referred to the balance sheet of NDTV BV which is also placed at page No. 764 of the paper book to show that from that money the NDTV Network BV invested a sum of Rs. 450 crores as an investment in NDTV Mauritius Media Ltd and also in NDTV Networks International Holdings BV. Therefore, he submitted that complete train of Rs. 642 crores received by the one of the subsidiary has found its way from that subsidiary company to the parent assessee or its 100% subsidiary. He therefore, submitted that there is a complete trail of the money which has been proved by the revenue beyond doubt to show that assessee is the owner of the sum of Rs. 642 crores. He then referred to the decision of the Hon'ble Supreme Court in case of Vodaphone International Vs. Union of India and another 341 ITR 1 and specifically para No. 67 and 68 of that judgment to show that corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of unexplained money. Further, the DRP enhanced the income of the assessee by another Rs. 254.75 crore under Section 68 of the Act on account of unexplained credit. 4. The AO passed final assessment order under Section 144/144C(13) on 21.02.2014 and assessed the income of the assessee at Rs. 838,33,37,197/- as against loss of Rs. (-) 64,83,91,422/- declared by the assessee in its return of income. 5. Against the final assessment order passed on 21.02.2014, the assessee has filed appeal-bearing ITA No. 1212/Del/2014 and the Revenue has also filed appeal bearing ITA No. 2658/Del/2014, which are pending before the Honble Tribunal. 6. The Revenue humbly prays that after the passing of final assessment order on 21.02.2014, during the penalty proceedings u/s 271(1)(c) of the Act, certain facts have come to light which have a vital bearing in the matter. These are explained in detail in the show cause notice dated 15.06.2016 issued u/s 271(1)(c) of the Act, copy of which has already been filed with the Tribunal by the assessee while praying for stay of penalty proceedings and wherein the Honble Tribunal vide order dated 16.09.2016 in SA No. 376/Del/2016 (in ITA No. 1212/Del/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of money from one party to the assessee without any obligation of repayment by assessee. He further submitted that during the penalty proceedings the statement of Shri KVL Narayan Rao was recorded who is the director of the company on 23.07.2015 as well as of Mr. Sanjay Dutt on 09.07.2015 where it is found that assessee has entered into bringing back money invested into subsidiaries through Bermuda Route in India. He further submitted that application for compounding of offence under FEMA also shows that while investing of such money the assessee has used ingenuine methods and violated the provisions of that Act. He therefore submitted that in fact penalty proceedings are closely linked and are arising from the assessment proceedings, therefore, the evidences requested to be admitted as additional evidence. 90. The ld AR vehemently objected to the application of admission of additional evidences which was raised by written submission filed on 06.07.2017 as under:- 1. That on 5th of July' 2017 revenue has filed a paper book containing 80 sheets containing additional evidence, which has been prayed to be admitted in terms of Rule 29 of ITAT Rules. The documents furnished as afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional evidence as aforesaid is being sought to be 'adduced' after the assessee's counsel had concluded his arguments/submissions in respect of the ground Nos. 2 & 3. It is submitted if revenue considered to adduce any additional evidence, it should have sought the liberty' to produce such evidence before the commencement of hearing and not after the opening submissions were concluded. The appellant further submits that in fact such evidence is still to be examined and adjudicated upon by the appropriate authority and thus such evidence as is alleged to be evidence is not one which deserves to be considered. The aforesaid submissions are being made which are without prejudice to the fact that no adverse inference is warranted to be drawn against the appellant and such evidence has no adverse effect at all. The appellant however seeks to furnish and place on record copy of its reply furnished in response to show cause notice dated 15.06.2016 along with annexures. (Annexure 'A ') 2.2 It is also submitted that, under Rule 27 of Order 41, production of additional evidence, whether oral or documentary is permitted only under three circumstances which are: Where (i) the trial Court ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td iv) 145 Taxman 530 (Del) CIT v. Globe Sales Corporation v) 219 ITR 267 (Del) CIT v. J. K. Synthetics Limited vi) 160 ITR 94 (AP) (FB) CIT V. H. Abdul Bakshi vii) 292 ITR 11 (SC) T. Ashok Pai v. CIT viii) 219 CTR 447 (Kar) Bhadra Advancing (P) Ltd. v. ACIT 5.1 In view of the above any alleged evidence which had not been tested as yet even by the AO and allegedly gathered in the penalty proceedings does not warrant admission under Rule 29 of the Rules. 5.2 It is submitted that mere fact that during independent stay proceedings a prayer was made to stay the penalty proceedings does not automatically warrant that the show cause notice as placed on record in the stay proceedings forms part of the instant proceedings. 5.3 It has been admitted that stay proceedings stood concluded vide order dated 16.9.2016 in SA No. 376/D/2016. Thus in absence of satisfaction of Rule 29 of the Rules the said evidence does not warrant any admission. 5.4 Likewise application for compounding of offence under FEMA' 1999 also is a fresh evidence, for which no substantial cause is shown and, its reliance is contrary to the principles laid out in the cases of Charandas Haridas v. CIT reported in 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that revenue cannot make an application for additional evidences. He placed reliance on the decision of the Delhi Bench in UOPLLC Vs. Additional Director of Income Tax 108 ITD 186 to show that in the peculiar facts and circumstances of the case the Revenue can adduce additional evidence. He submitted that looking to the facts of the assessee the additional evidence must be admitted. He further submitted that order of the coordinate bench in SA NO. 376/Del/2016 in the appeal of the assessee has granted the interim injunction for passing of the penalty order. He submitted that tribunal while granting the stay has exercised its power as it is related to the proceedings relating to the appeal. He submitted that assessee while seeking the stay has itself stated that the penalty proceedings are relating to the appeal therefore, it cannot be said that show cause notice issued cannot be admitted as additional evidence. With respect to the cross examination of the witness he referred to the para No. 8 of the stay order against passing of the penalty order and submitted that till the order in the appeal of the assessee tribunal has not allowed to confront the assessee with result of enquirie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documentary before the tribunal, but if the tribunal requires any document to be produced or witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause or if the income tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or otherwise, the tribunal for reasons to be recorded may allow such evidence to be adduced. On reading of Rule 29 we do not find any bar against application for admission of additional evidence by revenue if there is substantial cause. The above view has further been considered in the decision of coordinate bench in 108 ITD 186 considering the decision of Mahavir Singh Vs. Naresh Chandra of Hon'ble Supreme Court and decision of Hon'ble Rajasthan High Court in case of CIT Vs. Rao Raja Hanumat Singh relied upon by the ld AR. The Coordinate bench has held as under :- "9. In connection with the main issue relating to PE, the Department has sought to file additional evidence before the Tribunal. In this regard, it has moved an application dated 9-5-2006 under rule 29 of Income-tax Appellate Tribunal Rules, 1963 for admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT under rule 29. According to him, the revenue is not even entitled to make a prayer for admission of additional evidence as placed in the form of a bunch of papers and that too after the conclusion of arguments from the side of the assessee. If at all it was entitled to do so, then also such evidence ought to have been initially placed on record with the leave of the Tribunal before the commencement of hearing. 12. The learned counsel for the assessee further submitted that none of the documents sought to be filed as additional evidence by the revenue pertains to the year under consideration i.e., assessment year 2001-02 and the same are also not complete or self-contained documents which could be relied upon to draw any inference. He contended that the said documents, therefore, cannot be said to be relevant evidence which may be required by the Tribunal for adjudicating upon the issues involved in the present appeal filed by the assessee and since the Tribunal has neither required any such documents nor it could have required the same, the mandate of Rule 29 clearly prohibits the Department to produce the same. 13. Referring to rule 27 of Order 41 of CPC, the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is not permissible as held by ITAT in the case of Asstt. CIT v. Anima Investment Ltd. [2000] 73 ITD 125 (Delhi)(TM). 16. The learned counsel for the assessee emphasized that none of the authorities cited by the learned DR supports the contention of the Department that it is entitled to lead additional evidence before the Tribunal. On the other hand, the statement giving details of the various decisions of High Courts as well as the Tribunal placed at page Nos. 28 and 29 clearly shows that in none of the cases, the additional evidence sought to be produced by the Department was admitted by the Tribunal and even such a request made by the assessee also was not acceded to in some cases. He submitted that even the assessee has not been able to find any case decided wherein an application has been made by the revenue under rule 29 of the Appellate Tribunal Rules and the Tribunal, on an interpretation of Rule 29, has held that the revenue is entitled to produce additional evidence before it. He contended that this position clearly supports the stand of the assessee that under rule 29 of the Appellate Tribunal Rules, there is a complete bar for the revenue to adduce any additional e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that in order to decide the question of applicability of section 52(2) which was the subject-matter of appeal before it, it would be necessary in the interest of justice to consider the said affidavits. On appeal preferred by the assessee against the order of the Tribunal, Hon'ble Madras High Court held that the Tribunal had discretion to allow production of additional evidence under rule 29 of the Appellate Tribunal Rules, 1963 if the same was found to be required to enable it to pass orders or for any other substantial cause. 19. The learned CIT-DR submitted that there are various cases decided by the different High Courts wherein the additional evidence sought to be filed by the revenue was allowed to be admitted before the Tribunal and the same, therefore, clearly shows that there is no merit in the contention raised by the learned counsel for the assessee that there is a complete bar for the Department to even seek the admission of additional evidence. In this regard, he cited the decision of Hon'ble Gujarat High Court in the case of Smt. Urmila Ratilal v. CIT [1982] 136 ITR 7971 wherein it was held after examine the issue of admission of additional evidence under rule 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation moved by the Department under rule 29 for admission of additional evidence comprising documents found during the course of survey car- ried out subsequently at the assessee's premises has been strongly opposed by the learned counsel for the assessee. First of all, his contention is that as per Rule 29 of Appellate Tribunal Rules, 1963 there is a complete bar for the revenue to furnish any additional evidence unless it is so required by the Tribunal. In effect, his argument is that only if the Tribunal requires any additional evidence for the purpose of disposing of an appeal before it, it can direct the Department to furnish the same available in its possession and it is not permissible to the revenue to move any application suo motu under Rule 29 seeking admission of additional evidence. In support of this contention, he has cited six cases decided by the various High Courts and five cases decided by the Tribunal as enumerated at page Nos. 28 and 29 of his Paper Book-IV wherein the issue relating to admission of additional evidence was considered and decided. As rightly pointed out by him, out of these eleven cases, there were only two cases wherein the revenue had moved an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Rajasthan High Court referred to the relevant Rule 29 of the Appellate Tribunal Rules, 1963 and observed on page 535 of the report that the second limb of the condition of Rule 29 is if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them. It was observed by the Hon'ble Rajasthan High Court that a case before it was not a case where the assessee had raised any grievance that the assessing authority has decided the case without giving sufficient opportunity to adduce evidence on any specified or unspecified points and, therefore, this limb of the conditions obviously was not invoked at all. These observations of the Hon'ble Rajasthan High Court clearly indicate that insofar as the second limb of the conditions specified in Rule 29 relating to "deciding the case without giving sufficient opportunity to adduce evidence" is concerned, the assessee and assessee alone can be permitted to adduce additional evidence simply because the situation as contemplated in this condition can cause prejudice only to the assessee. Insofar as the first condition in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties to appeal are not entitled to produce additional evidence before the Tribunal, it has been given a power to require any document to be produced or any witness to be examined to enable it to pass order or for any other sufficient cause as per Rule 29 of the Appellate Tribunal Rules, 1963. 24. It is thus clear that none of the decisions cited by the learned counsel for the assessee lays down a proposition that there is a complete bar for the revenue to adduce any additional evidence before the Tribunal under Rule 29 of the Appellate Tribunal Rules, 1963 as sought to be canvassed by him while opposing the application moved by the revenue for admission of additional evidence in the present case. 25. Before us, the learned counsel for the assessee has submitted that he has not been able to find any case wherein an application moved by the revenue under Rule 29 has been accepted by the Tribunal allowing it to produce the additional evidence on inter-pretation of Rule 29. He has also submitted that none of the authorities cited by the learned CIT-DR supports the contention of the Department that it is entitled to lead additional evidence before the Tribunal. On perusal of the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be produced or affidavit to be filed to enable it to pass order or for any other substantial cause, it may allow the document to be produced or the affidavits to be filed. It was also held by the Hon'ble Madras High Court that this power conferred upon the Tribunal under Rule 29 was properly exercised by it in the facts and circumstances of the case. 26. Similarly, in the case of R. Dalmia (supra) cited by the learned DR, the assessee was in control of a number of companies in particular "JT". The ITO held certain cash credits appearing in the name of the JT as unexplained and treated the same as the income of the assessee. When the matter went in second appeal, the learned counsel for the revenue sought the permission of the Tribunal to place on record the balance sheets and profit and loss accounts of JT for the relevant periods as additional evidence which was vehemently opposed by the counsel for the assessee. The Tribunal was of the opinion that the additional evidence sought to be adduced by the revenue was relevant to the points at issue and would be of assistance to it in deciding the appeal. The objection of the counsel for the assessee, therefore, was overruled by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable it to pronounce judgment, it still considered that in the interest of justice something which remained obscure should be filled up so that it could pronounce the judgment in a more satisfactory manner, such a case would be one for allowing additional evidence for any other substantial cause under Rule 27(1)(b) of Order 41 of the Code. To the similar effect is the decision of Hon'ble Punjab & Haryana High Court in the case of Saligram Prem Nath (supra) cited by the learned CIT- DR wherein it was held that a Tribunal is vested with the requisite authority and jurisdiction to admit additional evidence and material in order to do substantial justice between the parties. Accordingly, the Tribunal was directed by Hon'ble Punjab & Haryana High Court to decide the matter afresh by taking into account the material placed on record by the revenue after affording an opportunity to the assessee to rebut it if necessary by adducing additional evidence. It was also clarified by their Lordships that it would be open to the Tribunal either to deal with the matter itself or to remand the case for this purpose to the ITO. 28. The decision of Hon'ble Kerala High Court in the case of Midas Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is within the discretion of the appellate authority to allow production of additional evidence if the said authority requires any document to enable it to pass orders or for any other substantial cause. The Tribunal is the final fact-finding body under the scheme of the Income-tax Act and powers, therefore, have necessarily to be exercised by it for deciding the questions of fact. While exercising its powers, if the Tribunal is of the opinion that additional evidence is material in the interest of justice for deciding a particular issue, its discretion cannot be interfered with unless it has been exercised on non-existing or imaginary grounds. In the case of Mahavir Singh (supra ) cited by the learned counsel for the assessee, it was held that section 107 of CPC enables an appellate court to take additional evidence or to require such other evidence to be taken subject to such conditions and limitations as are prescribed under Order 41 of Rule 27 of CPC. It was also held that the parties are not entitled, as of right, to the admission of such evidence and the matter is entirely in the discretion of the court which is of course to be exercised judicially and sparingly. It was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional evidence to enable it to pronounce judgment, it still considers that in the interest of justice, something which remains obscure, should be filled up so that it can pronounce the judgment in a more satisfactory manner. Such requirement of the Tribunal is likely to arise ordinarily when some inherent lacuna or defect becomes apparent upon its appreciation of the evidence. The power of the Tribunal to admit additional evidence in support of the claim in appeal is discretionary and no fetters can be imposed on the exercise of such power. However, as held by Hon'ble Allahabad High Court in the case of Ram Prasad Sharma v. CIT [1979] 119 ITR 8671 and by the Hon'ble Andhra Pradesh High Court in the case of A.K. Babu Khan v. CWT [1976] 102 ITR 756, it is not an arbitrary power but it is a judicial one circumscribed by the limitations given in Rule 29 of the Appellate Tribunal Rules, 1963. The conditions precedent for the exercise of power under Rule 29 must, therefore, be found to have been established. However, where there is no lack of evidence but yet the plea in support of admitting the evidence is so decisive and of clinching value with reference to the points at issue, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be read as part of the record and before drawing any inference on the basis of contents of that document admitted as additional evidence, an opportunity has to be given to the other side to explain or rebut the same. As held by Hon'ble Madras High Court in the case of R.S.S. Shanmugam Pillai & Sons (supra), if the Tribunal finds that the documents filed are quite relevant and for the purpose of deciding the issue before it, it would be well within its powers to admit the evidence, consider the same on merits or remit the matter to the lower authorities for examining the same. In the case of Smt. Urmila Ratilal ( supra), Hon'ble Gujarat High Court has held that when the additional evidence filed by the revenue was admitted by the Tribunal overruling the objection raised by the assessee, interest of justice demanded that the assessee was given an opportunity to explain or rebut the additional evidence before relying on the same. In the case of Charbhai Biri Works v. Asstt. CIT [2003] 87 ITD 189 cited by the learned counsel for the assessee, it was held by Pune Bench of ITAT in its Third Member decision that when the documents which were not available before the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidentiary value, as it was neither apostle certified or were signed by any of the parties on each page. it is further found by the revenue that parent company of Universal Studios International BV which invested US$150 million in the subsidiary company of the assessee and it was stated by the assessee NBC Universal Inc. , USA was its parent company which was found to be incorrect as 100% share of investor company were held by NBCU Dutch Holding Bermuda Ltd as a general managing partner of CA holding CB Bermuda. Even this company was not a party to any of the agreement placed before the lower authorities. Furthermore, the revenue has found that money introduced as share application money and securities premium is transferred to NDTV (assessee) in the form of dividend. It was further found by revenue that various emails between the group of persons completely show the modus operandi employed by the assessee for rerouting the money through complex cobweb of sham subsidiaries abroad. It is further alleged that various subsidiaries formed by the assessee for a limited period were in the nature of 'shell companies' and which lacks substances in those jurisdiction. As the issue involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the substantial cause of adjudication on the merits of the addition. Therefore, the application of the revenue for admission of additional evidence succeeds. 95. The ld AR in rejoinder to the argument of the ld DR on ground of addition of Rs. 6425422000/- is as under:- 1. Ground Nos. 3 to 3.3 of Grounds of Appeal relate to addition made of Rs. 642,54,22,000/- representing share capital raised by NDTV Networks International Holdings BV, a subsidiary of the appellant company (hereinafter referred to as "NNIH" or alternatively as "investee company") and brought to tax as income of the appellant company u/s 69A of the Act. 1.1 The learned Assessing Officer in pursuance to directions of Dispute Resolution Panel ("DRP") has made the aforesaid addition by holding (pages 148-149 of Appeal Set) as under: "8.14 In view of the above detailed facts and circumstances of the case and in compliance with the directions of the Honble DRP as reproduced above, it is held that the transaction involving the receipt of Rs. 642,54,22,000/- by the assessee's subsidiary company during the year is a "sham" transaction, through which the assesee has introduced its own unaccounted money and the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted that share subscription was received from the investor company through banking channels and thus the aforesaid contention disputing the genuineness of investment by way of share subscription lacks valid justification. 2.6 It is submitted from the evidence on record, it is apparent that M/s Universal Studios International BV, the shareholder was an associate of NBC Universal Inc. which is a group company of GE Group one of the largest company in the world. (see page 684 of PB Vol. II). Thus where the funds have came through banking channels from an well established entity, the assumption and presumption of the authorities that the transaction is sham and the amount received by the subsidiary of the assessee was the assessee's own money is a matter, which it is submitted cannot stand the test of judicial scrutiny. It has been not been shown that either no funds came as reflected in the bank account of investee company or it was the assessee's own funds by leading positive material. The conclusion is based on frivolous, unsubstantiated allegation that, it was assessee's own money and without leading any tangible material. Contention has been raised only on the basis of suspicion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that not only the confirmation from USBV had been filed (pages 724-725) but following evidences were also furnished in support on the issue of shares by NNIH to USBV: Sr. No . Date of filing Particular s Pag es of Main Pap er Page s of conci se Paper Nature of documents i) 30.3.2013 and 29.4.201 3 A copy of the shareholder agreement Share subscriptio na greement dated 23.5.2008 1-104 Book The shareholder agreement acknowledges the fact that the parties namely NBCU and USBV and NDTV (Appellant), NDTV BV, NDTV Networks BV, NNIH and NDTV Network PLC are to participate and have agreed to participate and enter into share subscription agreement to own the initial interest in the ii) 29.4.201 3 Share subscriptio na greement dated 23.5.2008 107 222 8-12 Share subscription agreement between the parties evidences the investment of USD 150 Mn. (INR 642 crores) iii) 29.4.201 3 Bank account No. 02.01.28.34 2 of Investee company 651 28 Evidencing receipt of money of share capital under share subscription agreement dated May 23, 2008 in the bank account of NNIH. iv) 29.4.201 3 Annual accounts of Investee company 652 665 29-41 Annual accounts of NNIH evidencing rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT vs. M/s Kamdhenu Steel and Alloys Ltd. reported in 361 ITR 220 has held that, no addition can be made by disbelieving the material placed by assessee, as he could have used coercive powers available to him. Reliance is also placed on the judgment of Honble Allahabad High Court in the case of Nathu Ram Prem Chand v. CIT reported in 49 ITR 561 and EMC Machine Works v. CIT reported in 49 ITR 650 wherein it has been held that, burden is on the Assessing Officer to enforce the attendance of the creditors. Likewise Honble Delhi High Court in the case of CIT vs. Jitin Gupta decided on 03.03.2009 has held that once necessary evidence has been placed on record and the learned Assessing Officer has not led any material to the contrary; no adverse inference can be drawn. Also in the case of CIT vs. Genesis Commet (P) Ltd reported in 163 Taxman 482 (Del) it has been held that, an officer, if he was not inclined to believe the material placed by assessee he could have used coercive powers available to him 4.4 It is thus submitted that revenue is blowing "hot' and "cold". It is submitted that having accepted the genuineness of the documents tabulated in para 4.2 above, including the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 53 ITR 623 have no application to the facts of the appellant company. 6.1 It is well-settled that judgment is a proposition what it actually decides and, not what logically or remotely can be deduced therefrom as has been held in the following cases: i) 188 ITR 402 (SC) Goodyear India Ltd. v. State of Haryana (SC) ii) 255 ITR 153 (SC) Padmasundara Rao v. State of Tamil Nadu "Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington v. British Railways Board [1972] 2 WLR 537 (HL). Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases." iii) 198 ITR 297 (SC) CIT v. Sun Engineering Works P. Ltd. 6.2 It is submitted that in the case of A. Govindarajulu Mudaliar v. CIT reported in 34 ITR 807 (SC) there was a credit in the accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally misconceived. 7 Now taking up the latter contention it will be seen that the revenue has referred to the following three agreements: i) Share subscription agreement dated 23.5.2008 (pages 107-222 of Paper Book-I) ii) Share holder agreement dated 23.5.2008(pages 10-104 of Paper Book-I) iii) Agreement dated 14.10.2009 for the sale and purchase of shares in NDTV BV between Universal Studios International B.V, NBC Universal, INC, NDTV Networks B.V, NDTV BV, NDT Networks PLC and NDTV (pages 1239-1263 of Paper Book-IV) 7.1 It is submitted that on the basis of the aforesaid agreements the learned counsel has contended that it is not a case of pure and simple purchase and sale of shares, as claimed by the appellants but is a device created by which in a short duration, funds received as a share capital has been received by the appellant (instead of funds received as a share capital by M/s NDTV Networks International Holdings). The aforesaid allegation it is submitted is totally disputed which lacks any substance to hold that the fund received were the sums owned by the assessee to be taxed u/s 69A of the Act. 7.2 The Honble Bench during the course of hearing directed the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f PB Volume-VIII. ix) Intellectual Property Assignment and Licence between NDTV Parent and NDTV Emerging Markets B.V. at pages 135-142 of PB Volume-VIII. x) Intellectual Property Assignment and Licence between NDTV Parent and NGen Media Services Pvt. Ltd at pages 143-150 of PB Volume-VIII. xi) Amended and Restated Co-operation Agreement between the NDTV Parent, Networks PLC, Imagine, Labs, Lifestyle and Convergence at pages 151-162 of PB Volume-VIII. xii) Amended and restated domain name transfer agreement between the NDTV Parent and Convergence at pages 163-166 of PB Volume-VIII. 7.6 Further even the copies of the agreements as stated in Annexure 2 (page 217 of Paper Book) are enclosed herewith: i) TheGeneral SharedServices Agreementdated 6.2.2007 between NDTV Lifestyle Ltd., NDTV Networks PLC and New Delhi Television Limited at pages 167-172 of PB Volume-VIII. ii) TheGeneral SharedServices Agreementdated 6.2.2007 between NDTV Convergence Limited, NDTV Networks PLC and New Delhi Television Ltd at pages 173-178 of PB Volume-VIII. iii) TheGeneral SharedServices Agreementdated 6.2.2007 between NDTV Imagine Limited, NDTV Networks PLC and New Delhi Television Ltd at pages 179-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness projection under the shareholders agreements itself which is titled as Annexure - 1, (Business plan) (Pg. 73 - 93 of PB) 8.1 He further contended that shares have been issued at an exorbitant premium though the company was incorporated only in April' 2008 and thereafter also wound up in April' 2009. 9 It is submitted that charging of premium on fresh issue of shares is based on the business potential of the group which mainly consists of the entertainment vertical of the business. It is settled in law that share premium received on the issue of shares has to be included in the paid up capital irrespective of whether the share premium has been maintained in a separate account apart from the reserve as held in the case of the Hon'ble Supreme Court in the case of CIT Vs Allahabad Bank Ltd. reported in 73 ITR 745. A detailed note on the formation of subsidiaries, their activities and the basis of valuation of USD 150 Mn. is separately enclosed as Annexures I and 2 of Note 1 already on record, though it is specific averment of the appellant that it would not be material in order to invoke the provisions of section 69A of the Act. 9.1 To support that the issuance of share p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant Company as NDTV is a company in which public is substantially interested. Therefore, no adverse inference could have been drawn in the facts of the present case in respect of charging premium. It is also important to note that the said provision is not applicable in the case of the investor being a foreign company investing in share capital of an Indian company at a premium. Further, it is a fact that both investor and investee companies are non-resident companies and the provisions of the domestic law would have no application whatsoever. 10 The learned counsel for the revenue also contended that subsequently in a short period of time said share capital was repurchased at a much lesser price which resulted into capital loss in the hands of the investor (USBV) which rendered entire transaction sham as it had no commercial and economic substance. 10.1 It is submitted that the said allegation is completely misconceived and devoid of any merits on account of the following reasons: i) The subsequent event of repurchase would not be material to determine the nature of the original transaction specially when the provisions of section 69A of the Act are invoked. On the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd paid up equity share capital of NDTV Imagine on the Closing date resulting in a decrease of NDTV networks Plc's stake in NDTV Imagine from 90.68% to 5% for a cash consideration aggregating to US$ 73.48 million. The transaction also involved a further infusion of a sum of US$ 50 million as equity capital in NDTV Imagine by TAPV, which has resulted in further dilution to 3.18%." 10.3 The above submission also overlooks Annexure - 2 of shareholders agreement (Pg. 94 - 134 of PB -1) which itself provides for merger of M/s NNIH, NDTV Networks BV after approval of all stake holders. 11 The learned counsel for the revenue has referred to para 68 of judgment of Apex Court in the case of Vodafone International Holdings BV vs. UOI reported in 341ITR 1. 11.1 It is submitted that the observations of the Apex Court in paras 67 and 68 has absolutely no application to the facts of the instant case. In the said case, the issue involved was whether the transaction of sale of shares outside India was a bonafide transaction and, if the answer to the question was affirmative, whether the assessee would be liable to tax in India in respect of the transfer of shares under the head 'capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and also in disregard of explanation tendered by the appellant company. The appellant company has established that transaction of issue of shares by its subsidiary was a genuine transaction. It was submitted that M/s. Universal Studios International BV, an independent company incorporated in Netherlands had under a shareholder agreement acquired 26% stake in NDTV PLC UK at an aggregate consideration. It is respectfully submitted that the revenue has completely ignored and overlooked the fact that the assessee company or its subsidiary had no role to play and the decision of investment was of an independent company. The revenue has failed to appreciate that the said company is subsidiary of GE group, one of the largest companies of the world. It is thus submitted that the of the revenue that contention of the learned counsel of the assessee had sought to explain the share capital receipt ITA No. 1212/Del/2014 & 2658/Del/2014 C.O. No. 233/Del/2014 (AY: 2009-10 M/s. New Delhi Television Ltd, Vs.ACIT,of Rs. 642.54 crores through lengthy and circuitous transactions and commercial substance/economic rationale for which have not been satisfactorily explained lacks credence or any merit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oldings BV. It is submitted that M/s NDTV Networks BV, is a company incorporated on 9.1.2008 in Netherland. It is submitted that, it is also on record that the said company is an investment company. It is also undisputed fact that there has been no finding or adverse observation that either under the Income Tax Act or any other Act that such company was dummy or non-existing company. 16 It is also submitted that it is well accepted that a subsidiary and its holding company are distinct and separate entities. They are subject to income tax on the profits derived by them on standalone basis, irrespective of their actual independence and regardless of whether the profits are reserved and distributed to shareholders/participants. It is well settled law that holding and its subsidiary are totally separate and distinct taxpayers. 17 The appellant also seeks to add that the assessment for NDTV for A Y 2010-11 was completed after due enquiries including enquiries through FT & TR from Netherland tax authority and no adverse inference was drawn with respect to buy back of shares vis-a-vis with a settlement of loan of US BV. It is pertinent to emphasize that transaction of receipt of loan a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions amounting to Rs. 648,42,28,619/- as proposed in the draft order and further enhanced your taxable income by another Rs. 254,75,00,000/-. 4. In compliance with the directions, the final assessment order was passed u/s 144/ 144C(13) on 21.02.2014 at an income of Rs. S. No. Nature of addition Amount of addition 1 Disallowance u/s 14A 78,40,990 2 Transfer Pricing adjustments 5,09,65,629 3 Addition u/s 69A on account of unexplained money 642,54,22,000 4 Addition u/s 68 on account of unexplained unsecured loans 254,75,00,000 Total 903,17,28,619 5. Penalty proceedings u/s 271(1)(c) of the Act were simultaneously initiated and notice u/s 274 read with section 271(1)(c) of the Act was issued to you on 21.02.2014. However, no reply has been received from you on the merits of the case till date. 838,33,37,197/, wherein the following additions totaling Rs. 903,17,28,619/- were made :- (in INR) 6. The facts of the case regarding the addition of Rs. 642,54,22,000/- are that during the year under consideration, New Delhi Television Ltd. (NDTV), along with four of its subsidiaries namely NDTV BV, NDTV Networks BV (NNBV), NDTV Networks International H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the face value without any credible valuation, the transaction was held as a part of scheme of routing own fund of the assessee company in the assessment order. 10. It was observed during the assessment proceedings that subsequently, during the immediately succeeding FY 2009-10, the very same shares were bought back by NDTV B V for Rs. 58.08 crores @ Rs. 634.17 per share. If the transactions were not sham, how could the same shares having face value of Rs. 50/- per share approx. be issued @ Rs. 7015.05 per share and further bought back @ Rs. 634.17 per share. That also is claimed in a situation when the issue of shares and the repurchase of shares are by an entity and its immediate subsidiary respectively. The transaction resulted in a claim of loss amounting to Rs. 584.45 crores for USBV and simultaneously resulted in an introduction of undisclosed income of Rs. 642.54 crores in the books of accounts of the NDTV group. As already recorded, no independent valuation was ever carried out by the group companies or by the USB V and the issue rate as well as the repurchase rate are claimed to be solely based on estimates and business projections. It is pertinent to mention that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfactorily explained. Assessee's theory of having sold a "Dream" to the investor has not been substantiated by any credible evidence as no details have been filed whatsoever for the so called business projections and the basis for computation of the sale price of the share at the astronomical price of Rs. 7,015/- which is 159 times of its face value of Rs. 45/-. Needless to mention that the subject company whose shares were sold was incurring huge losses and there was hardly any worthwhile business to justify the above sale price. Interestingly, the assessee/ subsidiaries have again repurchased the same share in the very next financial year at the price of Rs. 634.17 per share totalling Rs. 58 crores. Here also no details/ justification has been given by the assessee as to how the above buy back price was fixed by the assessee when the so called "Dream" went bust, as being claimed by assessee. What was the justification for the assessee to buy back the shares of nearly defunct and own subsidiary company at a value which was more than 12 times of the face value. The totality of the transaction clearly lead to the inescapable conclusion that the entire transaction of sale & s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was not genuine and there was no intention to comply with the said agreement. 15. Parent company of USBV is in Bermuda and not in USA 15.1 It is pertinent to mention that NDTV had represented throughout before the AO, the DRP and the ITAT that NBC Universal Inc., USA ("NBCU") is the parent company of Universal Studios International BV ("USBV"), which invested US $ 150 million (INR 642,54,22,000) in subscription of shares of NDTV Networks International Holdings BV ("NNIH"). However, this is found to be factually incorrect. The correct position is that 100% of shares of USBV were held by NBCU Dutch Holding (Bermuda) Limited, which was holding them in its capacity as General Managing Partner of CA Holding CV, Bermuda. It is pertinent to point out that the parent company in Bermuda was not even a party to the agreement for subscription of shares of NNIH by USBV. 15.2 Perusal of Annual Report of Universal Studios International BV for the year 2008 reveals that the parent company of USBV is NBCU Dutch Holding (Bermuda) Limited, which is holding the shares of USBV acting in its capacity as General Managing Partner of CA Holding CV Bermuda. The Annual Report mentions as under:- "Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NPLC without any commercial activities and without any employee or assets, except stating that it was on the advice of experts and for efficiencies. The explanation given by Mr. Rao regarding the objective of defeating the bar of 26% in news channels is not plausible, because the terms of agreement and subsequent events reveal that the fund of USD 150 million was introduced in companies connected with entertainment channels and no fund was introduced in any news channel company. Now if the fund was to be introduced in non-news companies only (like NDTV Imagine Limited, in which 100% FDI was permissible), then there was no bar in bringing the fund directly through FDI into India. This shows the inherent fallacy of the argument raised by Mr. Rao and also exhibits the lack of any commercial purpose or economic substance behind creation of cobweb of foreign subsidiaries. Even otherwise, regulations restricting FDI cannot be flouted by taking recourse to a well-planned scheme for both routing of money and circumventing the FDI regulations. It is a settled proposition of law that what cannot be done directly, is not permissible to be done obliquely, meaning thereby, whatever is prohibite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that he was part of core group led by Mr. Vikram Chandra, in active consultation with PWC and KPMG, which also included the Roys and Mr. Rao and this group was referred to as 'Nines'. 16.5 Mr. Dutt has stated that he along with Mr. Sanjay Jain quit when he became aware that the real purpose was to route the money without any intention of paying taxes and in violation of the various legal provisions. In support of his averments, he has also furnished copies of emails, as described in his statement also, which are reproduced below :- (i) Mail dated 21.05.2008 at 10:16 PM from Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy & others: -Subject: Press Announcements etc Dear Prannoy and all above Now that we are reaching the conclusion I wanted to remind everybody that all press releases.. stock exchange releases etc etc both by NDTV and NBCU should be whetted by us We must ensure that what is stated is that NBCU is subscribing to shares for a sum of S 150 m in NDTV Networks group company Overseas for an effective 26 percent stake. We must not mention that NDTV is receiving the 150 m as dividend or otherwise. If asked a question what will the money be used for ??? We need to decide h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2008 at 03:06 PM from Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy & others: -Subject: Re: FW: Press Announcements etc Dear Prannoy, Here is a shot at it, based on your draft Appreciate your problems but honestly the problem could become worse if we give a handle to the tax authorities. I am concurrently discussing with other partners now the draft below. Let's get on a call ASAP, Regards Vivek" (vi) Mail dated 22.05.2008 at 03:43 PM from Dr. Prannoy Roy to Mr. Vivek Mehra (PWC) & others: "Subject: Press Announcements - Final ? Thanks very much Vivek... based on our discussion over the telephone, I just wanted to confirm that this is what you have suggested as the final version: NDTV group and NBCU group have successfully concluded their strategic partnership initiative for the NDTV Networks business.By a subscription of shares for US S150 million, NBCU group now has an effective indirect stake of 26 % in NDTV Networks PLC UKNBCU has the option in three years to increase their stake, at the then fair market value, in the holding company of Networks PLC to 50% with NDTV group holding an equal 50% stake. Management control will always remain with NDTV group.As a conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he form of dividend, NDTV Networks BV further transferred money as under:- Trail 1 * Out of Rs. 643.35 crore received, NDTV Networks BV invested INR 389 crore in NDTV (Mauritius) Media Limited, a 100% subsidiary of NDTV * NDTV (Mauritius) Media Limited invested Rs. 387.59 crore in NDTV Studios Limited on 29.09.2008 [NDTV (Mauritius) Media Limited merged in NDTV One Holdings Limited, Mauritius on 30.09.2011] * NDTV Studios Limited merged in NDTV w.e.f. 01.04.2010 Trail 2 * Out of Rs. 643.35 crore received, NDTV Networks BV advanced INR 254.75 crore as unsecured loan to NDTV Networks Plc, UK ("NNPLC") * NNPLC was liquidated and merged in NDTV One Holdings Limited on 30.09.2011 * NDTV One Holdings Limited merged in NDTV on 02.11.2012 Conscious, deliberate and well planned attempt to conceal particulars of income 18. From the above, it is evident that the funds amounting to USD 150 million, which was the assessee company's own unexplained money, were introduced in NNIH through USB V under a pre-meditated and well planned strategy, taking all factors into account so that the real transaction is not detected by the tax authorities. The mail dated 21.05.2008 written by Mr. Vivek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstead, the assessee company created a fagade of investment by USBV though knowing fully well that money was to be introduced in the form of dividend exclusive to NDTV group. (iii) It has been concealed that the actual ownership and control over the money amounting to Rs. 642,54,22,000/- was always with the assessee company only, which introduced this money by creating complex cobweb of sham subsidiaries in Netherlands and UK and later routed this money through sham subsidiaries in Mauritius until the money was ultimately ploughed back into the assessee company in India. (iv) It is observed that not only during the assessment proceedings but in the present penalty proceedings also, the assessee company has continued to conceal the true facts. This is apparent from the statement of Mr. KVL Narayan Rao, Director as discussed in para 16.2 above, wherein Mr. Rao has given the rationale for creation of foreign subsidiaries as being the restriction imposed in FDI in news channel companies, whereas actually the funds introduced through foreign subsidiaries were meant for non-news companies only, which could be accomplished through obtaining direct FDI into these companies in India. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal B.V. by Universal Studios International B.V. it was agreed that a sum of US$150 million would be a consideration for purchase of shares. Accordingly, 915498 shares were subscribed and therefore, the price per share as Rs. 7015.05 shares. The above subscription money was received by NDTV Networks International Holdings B.V. Subsequently, vide agreement dated 14.10.2009 Titled as agreement for the sale and purchase of shares in NDTV BV between Universal Studios International BV as the seller and NDTV Networks BV as the purchaser of the shares of NDTV BV. According to that agreement it was stated that seller has subscribed for the sale of shares pursuant to subscription agreement dated 23.05.2008 and now the seller wishes to sell and the purchaser wishes to purchase the sale shares. The consideration of shares was US$12527250 whose approximate valuation is Rs. 634.17 per share. Therefore, the shares which were purchased by Universal Studios International BV on 23.05.2008 for US$150 million (Rs. 6,42,54,22,000/-) were being sold on 14.10.2009 for US$ 12527250 (RS. 58.08 crores). Meaning thereby, that the shares were purchased by the investor on 23.05.2008 @ Rs. 7015.05 per share we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011. from the above structure. It is apparent that three companies in the Netherland Jurisdiction were formed by the assessee and all of them were liquated on 25.03.2011. Therefore, the appellant structure is that two companies were formed in Netherland on 09.01.2008 and 10.04.2008 and by 25.03.2011 all the three companies in the Netherland jurisdiction were liquated after merger and liquidation. 101. After understanding the above structure it is also relevant to note that a sum of Rs. 2642.24 crores (US$150 million) were received by NNIH by share subscription agreement dated 23.05.2008 for 31.4 % stake bifurcating the above consideration of share capital of Rs. 6 lakhs and share premium of Rs. 642.54 cores. As subsequently, the NNIH in which the money was received was merged with NDTV BV. Therefore it is apparent at the time of repurchase of the shares i.e. 14.10.2009 when share purchase agreement was executed NNIH not in existence but was merged with NDTV BV. Therefore, on the date of agreement of the sale and purchase i.e. 14.10.2009 NNIH is not in existence as it is merged with NDTV BV and therefore the shares of NDTV BV (amalgamated company) were repurchased by NNBV. Apparent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest on fixed deposits of Rs. 13.33 lakhs and has an expenditure of operation and administration of Rs. 6.77 lakhs. As per profit and loss statement It has earned loss before taxes of Rs. 54.35 lakhs. The company has issued 2915498 equity shares of the face value of Euro 0.01 each fully paid amounting to Rs. 18.40 lakhs. During the year it earned premium of Rs. 642, 54,22,169. The share holding pattern of the company was that 20 lakhs shares were held by NDTV Networks BV and 915498 shares were held by USBV. Therefore, investment of NDTV Network BV in the company for 20 lakhs shares was Rs. 12.62 lakhs which is part of the issued share capital and the USBV has invested Rs. 577000/- in equity capital and a premium of Rs. 6425422169/-. Therefore, the person who was holding 68.6 % has just invested Rs. 12.62 lakhs and the entity who has acquired 31.4% stake has invested Rs. 642.54 crores in securities premium and Rs. 5.77 lakhs in the equity of the company. The company in its notes to accounts in schedule 6B has mentioned that this company was incorporated on 10.04.2008 by NDTV Network BV to create the corporate structure for the global media and non-news media related business. The b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork BV the holding company. Therefore, for making an investment in the step down subsidiary this company borrowed money from its holding company. On analysis of the financial statement of the NNIH it is apparent that this company does not have any substance but was merely created for the purpose of issue of above shares of Rs. 642 crores from USBV and taking away the dividend from it to the assessee's group company which is 100 % owned by the assessee. Looking to the Board of Directors of the company it is apparent that most of the directors of assessee are the directors in this company. It is apparent that anybody appointed from the side of investor USBV were just merely puppet directors otherwise, they would not have allowed assessee's group company to be paid dividend of such a magnitude of Rs. 643 crores to a shareholder holding 68% without getting a single penny for 31% shareholder. It is also not clear that how the dividend was not paid to USBV when there is a share issue deed. There is no plausible explanation from the assessee on this issue. It creates a suspicion that whether for all understanding the share holding of the NDTV BV and USBV are having similar rights or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting further discussion was with respect to share swap only where NBCU directors were to revert back. The meeting held on 22.09.2009 once again there is no mention where and when the meeting was held. Where also the funding proposal were discussed of various verticals. In that meeting in Sl No. 26 NBCU say that it has repeated offer to exit the business for US$25 million a sum which includes repayment of 12.5 million$ loan and no liability of the bonds or the business. NBCU said it was still happy to exit. Therefore, from the above board meeting it is apparent that on 22.09.2009 the NBCU expressed its desire to exit and it was repeated offer. Meaning thereby that NBCU wanted to exit quite earlier. It is also not known that when originally the NBCU expressed its desire to exit. In this in the same board meeting Mr. Pete Smith suggested that the board of company should seek independent advice with respect to their role in view of the difficult financial situation of the company. Because of these events it is apparent that the board of directors of NBCU was also not interested in being on the Board of this company. On reading of the minutes it is apparent that there was no interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting interest in seven companies. On looking at the shareholder equity statement of this company it is mentioned that all shares of this company are held by NBCU Dutch holding (Bermuda )Ltd acting in its capacity as general managing partner of CA Holding CV Bermuda. The annual accounts were published on 10/6/2010, by which date NNIH was already merged with NDTV BV , for such an investment there was only a statement that there was a significant acquisition concerns an indirect minority interest of a subsidiary company of New Delhi Television Limited . It was further stated that this USD 150 Million investment provides immediate access to the Indian television market. In the whole of the report there was no reference about the payments of dividend by NNIH but not received by this company USBV despite being such a huge investor. Even USBV was also formed in Netherlands jurisdiction. Further it incurs this year the loss in diminution of participation investments of 17470 thousands USD as loss from group companies. Therefore it is apparent that this company is mainly an investment company formed in Netherlands as its tangible fixed assets are very low compared to its financial assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofile of the investor. It is also not an ingredient to test the chargeability of otherwise of a receipt. 106. Now we come to various agreements entered in to by the various entities for the investments in NNIH and exiting from those investments . Parties Shareholder agreement dated 23.05.2008 for investment in NNIH by USBV and parties to the agreement Share subscription agreement dated 23.05.2008 for investment in NNIH by USBV Agreement for the sale and purchase of share in NDTV BV dated 14.10.2009 by USBV (seller) and NDTV Network BV (purchaser) (NNBV) NBC Universal Inc. As NBCU parent Parent of the investor company Parent of the existing company Universal Studios International BV The company who invested initial interest of 9145998 being 31% share in NNIH but 26% indirect stake in NDTV PLC A subscriber to the shares being investor Seller of the shares of NDTV BV New Delhi Television Ltd Assessee ultimate holding company of NNIH and other companies The parent of investee company As the NDTV parent NDTV BV A group subsidiary in Netherlands As the company whose shares are not being transferred on account of merger with NNIH with this company on 01.04.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ominee in the investee company but the investor appointed two directors in the NDTV Network PLC UK company. The directors also exited. The role of directors for safeguarding the interest of NBC Group They could not safeguard even the distribution of dividend to USBV despite holding 31% share out of dividend declared by NNIH. This despite there being a share issued dated 23.05.2008 placed at page No. 670 to 673 of the paper book Vol-II. The role of the director has already been discussed in earlier paras where the financial profile of investee company was discussed. Whether there were any evidences of the parties acting in accordance with the terms and condition of the agreements The NBCU wanted to expand its presence in India. There is no evidence of such an action of the NBCU Group. On reading of the minutes produced by assessee of NDTV Network PLC UK the intention could not be seen about entering of that company into the business in India. There were no action demonstrated with respect to the bond purchases, there is no evidence of secondment of the employees by the NBCU, there is no evidence placed on record of the joint venture between NBCU parent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent corporate world and complex business environment courts cannot shut their eyes and close their ears by accepting the complex cobweb of structures for tax avoidance devices adopted like this. The time has come when the judicial officers must understand the real intent behind various forms created by assessee in different jurisdictions across the globe for such a dubious financial transaction. The Hon'ble Supreme Court in case of Vodaphone International Holdings BV Vs. Union of India 341 ITR 1 in para No. 67 and 68 has discussed the international tax aspect of holding structure as under:- "International tax aspects of holding structures 65. In the thirteenth century, Pope Innocent IV espoused the theory of the legal fiction by saying that corporate bodies could not be ex-communicated because they only exist in abstract. This enunciation is the foundation of the separate entity principle. 66. The approach of both the corporate and tax laws, particularly in the matter of corporate taxation, generally is founded on the abovementioned separate entity principle, i.e., treat a company as a separate person. The Indian Income-tax Act, 1961, in the matter of corporate taxation, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace of residence comes about. Similarly, if an actual controlling nonresident enterprise (NRE) makes an indirect transfer through "abuse of organisation form/legal form and without reasonable business purpose" which results in tax avoidance or avoidance of withholding tax, then the Revenue may disregard the form of the arrangement or the impugned action through use of non-resident holding company, re- characterise the equity transfer according to its economic substance and impose the tax on the actual controlling non-resident enterprise. Thus, whether a transaction is used principally as a colourable device for the distribution of earnings, profits and gains, is determined by a review of all the facts and circumstances surrounding the transaction. It is in the above cases that the principle of lifting the corporate veil or the doctrine of substance over form or the concept of beneficial ownership or the concept of alter ego arises. There are many circumstances, apart from the one given above, where separate existence of different companies, that are part of the same group, will be totally or partly ignored as a device or a conduit (in the pejorative sense). 68. The common law juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax avoidant. To give an example, if a structure is used for circular trading or round tripping or to pay bribes then such transactions, though having a legal form, should be discarded by applying the test of fiscal nullity. Similarly, in a case where the Revenue finds that in a holding structure an entity which has no commercial/business substance has been interposed only to avoid tax then in such cases applying the test of fiscal nullity it would be open to the Revenue to discard such inter-positioning of that entity. However, this has to be done at the threshold. In this connection, we may reiterate the "look at" principle enunciated in Ramsay (supra) in which it was held that the Revenue or the court must look at a document or a transaction in a context to which it properly belongs to. It is the task of the Revenue/court to ascertain the legal nature of the transaction and while doing so it has to look at the entire transaction as a whole and not to adopt a dissecting approach. The Revenue cannot start with the question as to whether the impugned transaction is a tax deferment/saving device but that it should apply the "look at" test to ascertain its true legal nature (See Crave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks BV. Therefore, Rs. 643 crores was infused in NNIH and simultaneously they were siphoned from that company to NDTV Networks BV who is the part of NDTV Group. At this stage itself all financial interest of USBV and NBCU or any other group attached with the investor company has come to an end with the single motive to only conclude the transaction by liquidating the investment at substantial discount to give it a color of 'failed investment decision'. The dividend received by the NDTV Network BV was transferred in to trenches to two different companies owned by NDTV Group. A sum of Rs. 448.49 crores was invested in NDTV Mauritius Multimedia Ltd , Manutius which is 100% subsidiary company of NDTV Ltd crores(assessee). A further sum of Rs. 254.75 crores was given as unsecured loan to NDTV network PLC which is existing in UK jurisdiction and where 92% of shareholding is with NDTV (assessee). Subsequently, the NDTV Mauritius Multimedia Ltd which received Rs. 448.49 crores merged with NDTV one Holding Ltd, Mauritius w.e.f September 2011 and the amalgamated entity also the 100% subsidiary of NDTV. The NDTV one Holding Ltd Mauritius merged with NDTV Studious ltd and NDTV Studious Ltd the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Dr. Prannoy Roy & others. (iv) Mail dated 22.05.2008 at 02:14 PM from Dr. Prannoy Roy to Mr. Vivek Mehra (PWC) & others. (v) Mail dated 22.05.2008 at 03:06 PM from Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy & others. (vi) Mail dated 22.05.2008 at 03:43 PM from Dr. Prannoy Roy to Mr. Vivek Mehra (PWC) & others. (vii) Mail dated 22.05.2008 at 05:30 PM from Mrs. Radhika Roy to Mr. KVL Narayan Rao, Dr. Prannoy Roy & others. (d) The assessee submits that before assuming them to be valid evidence on which reliance can be placed in the present proceedings, you may kindly establish the genuineness, authenticity and source of the said documents so that the assessee could made its specific submission and originals of the above may also be made available for verification. (e) In addition to the above, the assessee also submits that given the peculiar facts and investigation conducted by your office and in order to make meaningful representation, we request you to provide details of all such material , enquiries, complaints and other evidence collected in relation to assessment of the year in question as well as in present proceedings or advise the assessee to seek these details under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he money be used for ??? We need to decide how to answer this question carefully. Thanks Vivek" (ii) Mail dated 22.05.2008 at 02:09 A M from Dr. Prannoy Roy to Mr. Vivek Mehra (PWC) & others : "Subject: Re: Press Announcements etc For everyone .. .This is very important... Could we please have a draft press release Vivek... Which we can use and send to nbcu. ... If possible, it's important that the press release should make clear that the money comes in to NDTV and does not stay in Networks" (iii) Mail dated 22.05.2008 at 07:58 AM from Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy & others : "Subject: Re: Press Announcements etc Prannoy... I need to start with a base case draft ...can somebody givethat to me.. Your second requirement is something I would avoid saying....let's discuss after I have seen a base draft BR Vivek" (iv) Mail dated 22.05.2008 at 02:14 PM from Dr. Prannoy Roy to Mr. Vivek Mehra (PWC) & others : "Subject FW: Press Announcements etc Dear Vivek... Need your final version on this please ... It will be released In a few hours and will need to be cleared by NBCU before that... The problem we have it that in the last communication we created a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol will always remain with NDTV group. As a consequence of this successful closing of the partnership with NBCU group, the parent company NDTV Ltd and it's wholly owned subsidiaries now have access to funds of US $150 mn which gives it the flexibility to use for any opportunities in the future including acquisitions, expansion in the news space, or in the beyond-news space as and when they arise." (vii) Mail dated 22.05.2008 at 05:30 PM from Mrs. Radhika Roy to Mr. KVL Narayan Rao, Dr. Prannoy Roy & others : "Subject: RE: Press Announcements - Final ? Dear Narayan, But this doesn't really address prannoy's concerns arising from our earlier communication and it would be a pity to miss this opportunity to correct any misconceptions. Just to remind you prannoy's four points below: "1. Everyone thought the money was to be put into Networks ... As a result we got no shareholder value for the Rs. 600 crs in NDTV 2. It's very important to state that the money is not in Networks ...But in NDTV ... As this affects the valuation analysts give to the deal... And it's a big boost if they know it's not in Networks and it is in NDTV... I know we can't say sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng each step and business rationale behind that. 114. The assessee has further contested that transaction in question does not pertain to the appellant and appellant is not a party to the said transaction. Further, the provisions of section 69A speaks about the ownership of the assets. According to the assessee as the money has been received by the subsidiary company it cannot be taxed in the hands of the assessee. We have also carefully perused this argument of the ld AR but are not convinced. The assessee cannot say that it is not a party to the said transaction when in each and every agreement the assessee is a party to the agreement. It cannot also be accepted for the reason that the subsidiary companies were having almost same set of directors or the persons controlled by the director that. Further, in the emails the chairman of the company and directors are communicating on this transactions it is not correct to say that the assessee was not a party, in fact the assessee is the beneficiary of whole transaction. Further, the reason for rejection of argument about chargeability u/s 69A is that it applies wherein, in any financial year where the assessee is found to be an owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant. According to him, the chargeability must be seen only at the time of receipt of the money. We have carefully considered the argument of the ld AR and also perused the decision of the Hon'ble Delhi High Court. According to us the ratio laid down by the Hon'ble Delhi High Court do not apply to the facts of the case before us and our reasons are that in that case no additional material existed other than the details of purchase and sale of shares. In the case before us, there are additional material in the form of trail of money coming back to the assessee and also the corroborative emails where the chairman of the group is also communicating on the financial transaction that are in question before us. Furthermore, in that particular case there was no business of the assessee, which has started, and therefore, the allegation of the revenue that assessee being a developer is charging on money, which is taken in cash, is incorrect. In the present case, it is the statement of the assessee that funds have been raised for the purposes of the business. Further revenue has established the complete modus operandi of the assessee to show that money provided by other parties in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mails exchanged, ld AO has correctly made addition in the hands of the beneficiary. In view of this, the reliance placed on this decision is devoid of any merit as the fact of that case and the facts of this case are materially different. Similarly, the ld AR has relied upon several decisions of various courts to state that the re-characterization of the transaction is not permitted, however, Hon'ble Supreme Court in case of Vodaphone has already decided this issue for re-characterization of income. In view of this after perusing all the decisions cited by the ld AR looking to the specific facts and circumstances of the case without discussing their fact but comparing with the facts of the case of the assessee we reject them, as they are not comparable. 117. The ld AR has also relied upon the decision of Hon'ble Delhi High Court in case of CIT Vs. Kamdhenu Steel and Alloy Ltd 361 ITR 220 and specifically page No. 227 to submit that when the money is transmitted through banking or other indisputable channels the transactions would be proved and for the purpose of genuineness of the transaction the copies of the share holder register, share application form, share transfer r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans without any obligation for repayment. Hence, we do not find any infirmity in the order of ld Assessing Officer as well as ld DRP and hence the addition of Rs. 642.54 crores in the hands of the assessee u/s 69A is confirmed. In the result ground no 8 of the CO is dismissed. 119. Ground No. 9 of the cross objection is against the addition of Rs. 2457500000/- (US$50 million) by invoking the provisions of section 68 of the Act despite there being no credit in the books of the appellant. 120. The brief facts of the case is that during the year under consideration the assessee through bonafide subsidiary NLPLc has raised unsecured loan amounting to Rs. 254.75 crores. On query the assessee submitted that it has been raised from NNPLCs intermediate holding company NDTV Network BV and the relevant details has been filed during the course of assessment proceedings for AY 2008-09. Assessee further filed that the source of the loan was from NDTV Networks BV and above amount was disclosed in the books of NNPLC and NDTV Network BV. The assessee further supported the same with the copies of the financial statement of both the above subsidiaries. The unsecured loan was also pursuant to lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the AO to conduct further enquiries in the case, as directed vide the following letters issued by the DRP :- (i) F.No. DRP-II/Del/2013-14/259 dated 24.10.2013 (ii) F.No. DRP-II/Del/2013-14/262 dated 28.10.2013 (iii) F.No. DRP-II/Del/2013-14/278 dated 01.11.2013 9.3 During the remand proceedings, the assessee was asked to explain regarding the impugned transaction and after examining the issue and considering the various aspects of the transaction, report was submitted to the Honble DRP vide this office's letter F.No. ACIT/Circle-13(1)/NDTV/2013- 14/1794 dated 11.12.2013, the relevant extract of which is reproduced as under :- "2.4 Tax implication of unsecured loans amounting to Rs. 365.25 crores received by NDTV through its subsidiary NNPLC 2.4.1 The Honble DRP vide letter no. 262 dated 28.10.2013 had directed further enquiries to be made regarding the unsecured loans amounting to Rs. 365.25 crores allegedly received by NDTV through its subsidiary NDTV Network Plc ("NNPLC") and the tax implication thereof. 2.4.2 Vide this office's letter no. 1705 dated 11.11.2013, the assessee was asked to explain on the issue as under :- "2.3 During the year, the assessee company, throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to raising of bonds were duly filed before Investigation Officer and DIT (Intl) during the course of assessment and was also disclosed in the Audited Accounts of the NDTV for AY 2008-09 and onwards. In view of the above, we request your goodself to kindly consider the documents submitted in the assessment of AY 2008-09 and report obtained in the course of assessment from HMRC which are already on record." 2.2.3 In this regard, it is stated that the assessment record in your case for AY 2008-09 has been perused and it is found that there are no such documents on record. Accordingly, you are given an opportunity to now file the following documents, which are stated to have been filed by you earlier:- (i) Complete list of the subscribers of bonds, subscription agreement and other relevant details claimed to have been filed during the course of the assessment proceedings for AY 2008-09. (ii) Complete information with respect to raising of bonds claimed to have been filed before Investigation Officer and DIT (Intl) during the course of assessment proceedings. 2.2.4 In this regard, please also refer to letter filed by you on 29.11.2013, wherein you have stated that the increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee on 16.12.2013 and the assessee was asked to treat the same as enhancement notice by the DRP. In response, the assessee sought to furnish additional evidence, which was handed over by the DRP to this office for report on the same. Consequently, in continuation to the remand report dated 11.12.2013, another report was submitted to the Hon'ble DRP vide this office's letter F.No. ACIT/Circle-13(1)/NDTV/2013-14/1832 dated 26.12.2013, the relevant extract of which is reproduced as under :- - Kindly refer to the proceedings during the hearing conducted by the Hon'ble DRP on 23.12.2013, wherein the assessee was to furnish documentary evidence in this office on 24.12.2013 and the undersigned was to submit the final report on the issue of unsecured loans to the tune of Rs. 365.25 crores. 2. In this regard, and in continuation to this office's letter no. 1705 dated 11.12.2013, the report in the matter is submitted as under :- 2.1 Tax implication of unsecured loans amounting to Rs. 365.25 crores received by NDTV through its subsidiary NNPLC2.1.1 The Hon ble DRP vide letter no. 262 dated 28.10.2013 had directed further enquiries to be made regarding the unsecured loans amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Annexure - 1 of this submission) 5.4 In view the above, the assessee herein below explains the nature of the above liabilities of NNPLC as understood in Para 5.3 of this letter in order to facilitate completion of the remand proceedings arising in course of the proceedings pending before the Hon'ble DRP for the year in question :- 5.5 During the year under consideration NNPLC raised a sum of Rs. 254.75 Crores from its intermediate holding company NDTV Networks BV. Further, there is an increase in the liability towards the repayment of Bond holders from Rs. 399 Crores to Rs. 509.5 Crores as on 31st March'2009, thus, there is an increase of Rs. 110.5 Crores due to currency translation. Therefore, the total increase in liabilities during the year was Rs. 365 Crores. The copy of account in this regard is enclosed as Annexure - 2 of this submission. 5.6 In respect of the loan liability of Step up Coupon Bonds, during the immediately preceding year i.e. AY 08-09, the complete enquiry was made by AO of NDTV in respect of issuance of bonds by NNPLC. In this regard that the reference was also made to FT & TR and the information was called from HMRC, UK. The assessment for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain confronted on this issue as under :- "2.2 Regarding the raising of an amount of Rs. 365,25,00,000/- as unsecured loans through your subsidiary NNPLC, vide letter dated 11.11.2013, you were requested to furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. You have stated in your reply filed 26.11.2013 that sum of Rs. 254.75 crores was raised by NNPLC from its immediate subsidiary NDTV Networks BV. Another addition of Rs. 110.5 crores is stated to be on account of currency translation. However, no evidence has been filed by you in support of your assertions." 2.1.5 Vide the same letter, the control and management of M/s. NDTV Network Plc, UK being with the assessee company M/s. New Delhi Television Limited was also confronted as under :- "2.1.1 Neither NNIH nor NNPLC were having any business activities. NNIH was a holding company and NNPLC was incorporated to promote the interests of NNIH and other group companies. NNPLC did not have any business activities. It had no fixed assets and there was no rent paid. Apart from incorporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signed in India and the directors were also Indian is not correct. On the contrary, the fact is that the accounts which you have perused are the accounts which have been used for the purpose of consolidation of Financial Statements of NDTV group as a whole in order to comply with Companies Act provisions. Thus, the financials statement formed part of the consolidated financial statements of NDTV (including its subsidiaries) and used for only that limited purposes. It is also submitted that it is factually incorrect that all the directors are Indian on the board of NNPLC as there are other non-resident directors as well. 1.19 Further, in our earlier submissions, we have informed your goodself that through proper channels under India UK treaty, the HMRC UK has sent a report to FT & TRto your office wherein they have provided all the information regarding existence of NNPLC and tax compliance in accordance with UK tax laws i.e. filing of its tax returns, WHT returns, etc. 3. Furnishing of evidence in relation to reinstatement of forex liability amounting to Rs. 110.5 Crores As earlier submitted, the increase of Rs. 110.5 Crores in the Step up Coupon Bonds at year end in books of N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessment record in your case for AY 2008-09 has been perused and it is found that there are no such documents on record. Accordingly, you are given an opportunity to now file the following documents, which are stated to have been filed by you earlier:- (i) Complete list of the subscribers of bonds, subscription agreement and other relevant details claimed to have been filed during the course of the assessment proceedings for A Y 2008-09. (ii) Complete information with respect to raising of bonds claimed to have been filed before Investigation Officer and DIT (Intl) during the course of assessment proceedings. 2.2.4 In this regard, please also refer to letter filed by you on 29.11.2013, wherein you have stated that the increase of Rs. 110.50 crores in the Step Up Coupon Bonds is merely the reinstatement of foreign currency liability. In this regard, please furnish the relevant copies of accounts along with complete book entries made in Journal, Ledger, etc. in respect of the said increase reflected in the accounts. Also furnish copies of accounts regarding interest paid to the said investors during the year. 2.2.5 Regarding the balance addition of Rs. 254.75 crores i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of NDTV group is enclosed as Annexure D. With respect to the balance amount of Rs. 254.75Crores, it is already submitted that it represents the loan form NDTV Networks BV and the amount is duly disclosed in the books of NNPLC and NDTV Networks BV and the copies of the financials statements of both the above subsidiaries were filed before the Ld. AO during the course of assessment vide submission dated 27th February'13 & 11th March'13. The copy of the submission is duly enclosed as Annexure E1 & E2 for your kind reference." 2.1.9 Keeping in view the above facts and circumstances of the case, the facts of the case emerge as under :- 2.1.10 While passing the draft assessment order, the then AO had recorded in the Office Note to the Draft Assessment Order dated 31.03.2013 as under :- "During the year the assessee company through its guarantees raised an amount of Rs. 365,25,00,000/- as unsecured loans through its subsidiary M/s NDTV Networks Plc. At the present stage the assessee has not discharged its primary onus regarding receipt of this amount by way of unsecured loan and therefore is liable to be proceeded against under the provisions of section 68 and 69A of I T Act, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1.15 In its Annual Report for FY 2009-10, it is stated as under :- "The Company through its subsidiary NDTV Networks BV, repurchased 26 percent indirect stake held by NBC Universal Inc., in its subsidiary NDTV Networks Plc." 2.1.16 In the above referred report, it is further stated as under :- "NDTV Networks Plc repurchased US$ 100 Million Step up Coupon Bonds issued by it earlier." 2.1.17 From the above position as reflected in the Annual Reports of the assessee, which are also available on the assessee's website http://www.ndtv.com/converQence/ndtv/corDorateDa Qe/annual repo rts.aspx?Dage=fr, it is observed that the assessee company had incorporated NNPLC in UK in November, 2006 as its 100% subsidiary and thereafter, NNPLC was made subsidiary of NNBV, when a month after incorporation of NNPLC, NNBV was incorporated in December, 2006. Thus, being 100% subsidiary, NNPLC was conceived and controlled by NDTV. Although NNPLC cannot be said to be an agent or mere extension of NDTV solely on the ground of its being 100% subsidiary of NTDV, the facts regarding the control exercised by NDTV over the affairs of NNPLC are discussed below. 2.1.18 NNPLC was incorporated on 30.11.2006 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced its own unaccounted income from undisclosed sources with the help of this reflected transaction. Out of this, Rs. 254.75 crores is stated to have been transferred in the account books of NNPLC in the shape of unsecured loan from NDTV BV. Again, the assessee NDTV is a party to the Loan Agreement. 2009-10 (i) NDTV through its subsidiary NDTV Networks BV repurchased 26 percent indirect stake held by NBCU in NNPLC. (i) NDTV has stated in its Annual Report that NDTVthrough its subsidiary NDTV Networks BV, repurchased 26 percent indirect stake held by NBC Universal Inc., in its subsidiary NDTV Networks Plc. Though the shares purportedly subscribed, not purchased, by NBCU were those of NNIH and not of NNPLC, the 2nd in vertical subsidiary of NNIH, yet it can be seen that the emphasis is on NNPLC and there is no reference to NNIH or NDTV BV. It is further pertinent to mention that the repurchase, occurring barely after 18 months, was for about Rs. 58 crores only as against the 'purchase' for Rs. 642.54 crores. There is no rationale in this transaction - no commercial purpose or economic substance, other than to create a loss of Rs. 584 crores for NBCU and introduction of own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the veil is lifted, with regard to the present proceedings for AY 2009-10, it can be observed as under (i) NDTV through NNPLC has introduced its own unaccounted income from undisclosed sources amounting to Rs. 642.54 crores in the garb of equity subscription. Detailed report regarding taxability of this sum has already been submitted to the Honble DRP vide letter no. 1794 dated 11.12.2013. (ii) NDTV through NNPLC has enhanced the liability on account of Step Up Coupon Convertible Bonds by Rs. 110.50 crores in the Balance Sheet of NNPLC from Rs. 399 crores to Rs. 509.50 crores, which is stated to be on account of currency translation. Further, NDTV has introduced unsecured loans amounting to Rs. 254.75 crores from NDTV BV in the books of NNPLC. The tax implications of this issue are the subject matter of the present report, which necessitated the lifting of corporate veil first, as discussed in the preceding paras of this report. 2.2 Regarding enhancement of liability on account of Step Up Coupon Convertible Bonds by Rs. 110.50 crores 2.2.1 As discussed above, USD 100 million were reflected to have been raised through Step Up Coupon Convertible Bonds during FY 2007-08. As st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 110.50 crores, being enhancement during the year, in the original liability from unproved source, is proposed to be added to the assessee's taxable income for AY 2009-10. 2.3 Regarding introduction of unsecured loans amounting to Rs. 254.75 crores from NDTV BVin the books of NNPLC2.3.1 During the year under consideration, NDTV through NNPLC has raised unsecured loan amounting to Rs. 254.75 crores as mentioned in the relevant Schedule to Balance Sheet as on 31.03.2009. When asked vide this office's letter no. 1705 dated 11.11.2013, the assessee replied that the unsecured loan amounting to Rs. 254.75 crores had been raised from NNPLC's intermediate holding company NDTV Networks BV and the relevant details had been filed during the course of assessment proceedings for AY 2008-09. 2.3.2 Vide letter dated 05.12.2013, it was intimated to the assessee that on perusal of assessment record for AY 2008-09, no such documents were found. Accordingly, the assessee was given an opportunity to now file these documents, which were being claimed to have been filed by it earlier. The assessee was also intimated that it had not discharged the onus cast upon it in respect of the above transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , are photocopies, not subject to any verification or enquiries. It is pertinent to place on record that any specific issues can be proved only by specific evidence and not on the strength of claimed reputation or volume of business of the lender. Hence, the assessee has not been able to prove the source of addition in unsecured loans and the same is proposed to be added to the assessee's taxable income. 3. The report is submitted for kind perusal and consideration." 9.5 After considering the above facts, the Honble DRP vide its directions dated 31.12.2013 issued u/s 144C(5) of the Act held that out of Rs. 365.25 crores reflected as increase in liabilities, an amount of Rs. 110.50 crores was due to restatement of the original amount pertaining to the transaction occurring in FY 2007-08 relevant to AY 2008-09. Regarding the balance amount of Rs. 254.75 crores, the DRP held that the assessee failed to discharge its onus of proving the genuineness of the transaction. The observations of the DRP are reproduced below -5.17. AO has brought to the notice of the DRP through his letter dated 20.08.2013 forwarded by the Addl. CIT, Range-13, New Delhi that an amount of Rs. 365.25 crores wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of assessment proceedings for AY 2008-09. It was claimed that complete evidence regarding the same had been filed before the AO during the said assessment proceedings and the AO had also obtained information from HMRC through FT & TR. Vide further reply dated 29.11.2013, the assessee also filed copy of exchange rates for the relevant period. 2.4.4 Vide this office's letter dated 05.12.2013, the assessee was confronted as under :- "2.2 Regarding the raising ofRs. 365.25 crores as unsecured loans 2.2.1 Regarding the raising of an amount of Rs. 365,25,00,000/- as unsecured loans through your subsidiary NNPLC, vide letter dated 11.11.2013, you were requested to furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. You have stated in your reply filed on 26.11.2013 that sum of Rs. 254.75 crores was raised by NNPLC from its immediate subsidiary NDTV Networks BV. Another addition of Rs. 110.5 crores is stated to be on account of currency translation. However, no evidence has been filed by you in support of your assertion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the above transactions of raising unsecured loans, in the light of facts of the case discussed in the foregoing paras of this letter read with letter dated 27.11.2013, please explain and substantiate your position." 2.4.5 In response, vide letter dated 10.12.2013, the assessee stated that out of the total addition of Rs. 365.25 crores appearing in the Balance Sheet of NNPLC, an amount of Rs. 110.50 crores was on account of adjustment of fluctuation in exchange rate of currency and regarding the balance amount of Rs. 254.75 crores, the assessee stated that this was the unsecured loan obtained from NDTV BV. However, no confirmation was filed nor this office was afforded any verification regarding the creditworthiness of the lender or the genuineness of the transaction. In the absence of these, the assessee has not discharged its onus u/s 68 and there is no alternative but to propose that the amount of Rs. 254.75 crores may be added to the assessee's taxable income for the year under consideration. Further, it is pertinent to mention that although the assessee claimed that "the complete list of the subscribers of bonds, subscription agreement and other relevant details wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified by the AO during the assessment proceedings for AY 2008-09 and also through information obtained from UK tax authorities through FT & TR. It was contended that complete details regarding investors and source of investment was given to the AO at the relevant time. The details were also stated to have been furnished before Investigation officer and DIT (Intl) during enquiries by these officers. 2.2.2 Vide this office letter dated 05.12.2013, the assessee was informed that no such documents were found in the assessment record for AY 2008-09. The assessee vide letter dated 09.12.2013 stated that it was again filing copy of the submission dated 08.02.2012 filed in the course of assessment of AY 2008-09 before AO, which consisted of the complete list of the subscribers to bonds, subscription agreement and other relevant details and documents enclosed as Annexure B. Copies of submissions dated 28.05.2012, 31.05.2012, 11.06.2012 and 20.07.2012 stated to have been filed before the then AO and copies of submissions dated 18.02.2011, 03.03.2011, 08.03.2011, 29.03.2011 and 30.03.2011 stated to have been filed before the Investigation Officer and DIT were also claimed to have been enclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly disclosed in the books of NNPLC and NDTV Networks BV and the copies ofthefinancials statements of both the above subsidiaries were filed before the Ld. AO during the course of assessment vide submission dated 27.02.2013 & 11.03.2013. The copies of the said submissions were claimed to be duly enclosed as Annexure El & E2 of the reply dated 09.12.2013. 2.3.4 I have perused the assessee's letters dated 27.02.2013 (running into 10 pages) &11.03.2013 (running into 2 pages) marked as Annexure El and Annexure E2 respectively. At the outset, it is submitted that there is no reference to the impugned issue of unsecured loans amounting to Rs. 254.75 crores raised during the year. The contents of the referred letters address certain queries raised by the AO and query regarding unsecured loans is not one of such queries. The bare letters are not even supported by any Annexures mentioned ion the said letters. 2.3.5 Under the circumstances, when the attached annexure- less letters do not contain any reference to query regarding unsecured loans nor attempt to address such query, therefore, filing of such letters does not serve any purpose 2.3.6 It is pertinent to mention that during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any interest, the reason for which has not been explained. The amount involved is quite a large sum of money. Further, as per this document, the interest free credit facility was to be granted on the basis of a duly completed utilization request, where as no such utilization request or basis for seeking the above credit facility has been produced by the assessee before the AO or before the DRP. We are therefore in agreement with the AO's finding that the onus of proving the genuineness of the loan transaction has not been discharged by the assessee. The AO is, therefore, directed to make addition of Rs. 254.75 crores. " 9.6 In view of the above detailed facts and circumstances of the case and in compliance with the directions of the Honble DRP as reproduced above, it is held that the assessee has failed to discharge its onus of proving the genuineness of the transaction of raising unsecured loan through its subsidiary NDTV Networks Pic and hence, the amount of Rs. 254.75 crores representing the amount of such unsecured loan is added to the assessee' taxable income u/s 68 of the Act. 9.7 As I am satisfied that on this issue, the assessee has concealed the particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reply at page no. 23 to 25 of its reply submitted on 02.11.2016. Even otherwise, Mr. Rao is the Director of the company and director of the some subsidiaries. He was also the CEO of the company. During the course of his examination, he was asked question No. 34 wherein the details of funds raised and retained of the foreign subsidiaries was asked. He replied that most of the funds came to the Indian subsidiaries particularly NDTV Imagine through NNPLC. According to him this included a loan of US$ 50 million, which came to NNPLC as a loan from NDTV BV and was in fact was out of subscription money received from NBCU. In view of this statement of the Director of company who was at the helm of the affairs we do not have any option but to set aside this ground of cross objection back to the file of the ld Assessing Officer with a direction to make a proper enquiry with respect to the loan of US$50 million. The ld Assessing Officer is further directed to carry enquiry also with respect to the fact that whether this loan amount was also out of subscription sum received from NBCU and is part of the total consideration of Rs. 642 crore to avoid any duplication of addition in the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore invoking Rule 8D. in view of this, the ld DRP directed the AO to record the reasons accordingly. Consequently, in the final assessment order vide para No. 5.2 at page No. 38 recorded the reasons and retained the disallowance. 128. The ld AR further placed before us his written submission at para NO. 38 to submit that no disallowance can be made as under:- 38 GROUND NO. 6 to 6.1 OF GROUNDS OF APPEAL: DISALLOWANCE OF Rs. 78.40.990/- OF CLAIM OF DEDUCTION U/S 14A OF THE ACT 38.1 The Appellant is a listed company in Bombay Stock Exchange (BSE) / National Stock exchange (NSE). In the course of its business of news broadcasting it had made investments in its subsidiaries in India as well as outside India. In addition to the same, the company had also made investment in share capital of other Indian companies. The details of such companies are reproduced at page 95 of the appeal set wherein the appellant disclosed the year of investment as well as the dividend received during the year. For the sake of ease of reference, the details are reproduced in a tabulated manner below 129. The Id DR submitted that AO has recorded his satisfaction about the assessee's calculation and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; B= average value of investment in Balance sheet on the 1st day and last day of previous year, income from which does not or shall not form part of the total income C= average of total assets in Balance sheet on the 1st day and last day of previous year 3 An amount equal to 1A% of average value of investment in Balance sheet on the 1st day and last day of previous year, income from which does not or shall not form part of the total income Rs. 11,52,500/-* Expenditure incurred in relation to exempt income Rs. 78,40,990/- * As computed in draft assessment order and reproduced in para 5 above. 5.2 On this issue, it is observed that no managerial expenses in respect of investment made by the assessee in group companies and other companies have been reflected or disallowed and offered for taxation. The assessee has claimed having incurred Nil expenditure in respect of these investments. It is pertinent to mention here that the assessee company has common infrastructure and common personnel for earning income under various heads, but still, no separate expenditure was booked for earning the exempt income comprised in the mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile working disallowance u/s 14A. further, if the assessee has tax-free funds available more than the amount of investment then no disallowance with respect to the interest expenditure can be made of the nexus is not proved by the Assessing Officer. in view of all these facts in the interest of justice we set aside the issue of disallowance u/s 14A back to the file of the ld AO with a direction to recomputed disallowance after giving assessee a reasonable opportunity of hearing. The assessee is also eligible to raise relevant contention and submit the relevant details to support its claim. In view of this ground No. 11 of the cross objection is allowed accordingly. 132. Ground No. 12, 13 of the appeal are with respect to computation of arms length price with respect to the business support services where the ALP was determined an adjustment of Rs. 7463229/- was made. The contention of the assessee is that price received was Rs. 74687177/- is taken instead of Rs. 75277881/-. The ld AR submitted that assessee has been denied the benefit of working capital benefit while considering the adjustment. He further submitted that the objection were raised before the ld Dispute Resolution P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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